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Factor Prices, Employment and Investment in U.K. and West German Manufacturing


  • Dinenis, Elias
  • Funke, Michael


This paper investigates the empirical performance of a system of investment and employment equations for the U.K. and West German manufacturing sectors. The distinguishing feature of the model is the assumption that firms face adjustment costs in changing the stock of capital and labor and that these costs are interrelated. That makes the employment and investment decisions of the firm interdependent, with employment being determined by investment and vice versa. The empirical implementation of the model for both countries is satisfactory and outperforms a rival model in which employment and investment decisions are made separately. Copyright 1994 by Blackwell Publishers Ltd and The Victoria University of Manchester

Suggested Citation

  • Dinenis, Elias & Funke, Michael, 1994. "Factor Prices, Employment and Investment in U.K. and West German Manufacturing," The Manchester School of Economic & Social Studies, University of Manchester, vol. 62(4), pages 412-424, December.
  • Handle: RePEc:bla:manch2:v:62:y:1994:i:4:p:412-24

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    References listed on IDEAS

    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Mervyn A. King & Mark Robson, 1989. "Endogenous Growth and the role of History," NBER Working Papers 3151, National Bureau of Economic Research, Inc.
    3. Xavier Sala-i-Martin, 1990. "Lecture Notes on Economic Growth(II): Five Prototype Models of Endogenous Growth," NBER Working Papers 3564, National Bureau of Economic Research, Inc.
    4. Grier, Kevin B. & Tullock, Gordon, 1989. "An empirical analysis of cross-national economic growth, 1951-1980," Journal of Monetary Economics, Elsevier, vol. 24(2), pages 259-276, September.
    5. Russell Cooper & Andrew John, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, Oxford University Press, vol. 103(3), pages 441-463.
    6. Stern, Nicholas, 1991. "The Determinants of Growth," Economic Journal, Royal Economic Society, vol. 101(404), pages 122-133, January.
    7. Kormendi, Roger C. & Meguire, Philip G., 1985. "Macroeconomic determinants of growth: Cross-country evidence," Journal of Monetary Economics, Elsevier, vol. 16(2), pages 141-163, September.
    8. Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834, January.
    9. Robert Summers & Alan Heston, 1991. "The Penn World Table (Mark 5): An Expanded Set of International Comparisons, 1950–1988," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 327-368.
    10. Sala-I-Martin, X., 1990. "Lecture Notes On Economic Growth: Five Prototype Models Of Endogenous Growth," Papers 622, Yale - Economic Growth Center.
    11. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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    Cited by:

    1. Philip Tomlinson, 2002. "The Real Effects of Transnational Activity upon Investment and Labour Demand within Japan's Machinery Industries," International Review of Applied Economics, Taylor & Francis Journals, vol. 16(2), pages 107-129.
    2. J Hatzius, 1997. "Foreign Direct Investment," CEP Discussion Papers dp0336, Centre for Economic Performance, LSE.
    3. Felix FitzRoy & Michael Funke, 1994. "Real wages, investment and employment: New evidence from West German sectoral data," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 130(2), pages 258-272, June.

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