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Lumpy investments, factor adjustments, and labour productivity

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Listed author(s):
  • Øivind A. Nilsen
  • Arvid Raknerud
  • Marina Rybalka
  • Terje Skjerpen

Abstract

This paper describes firms' output and factor demands before, during, and after episodes of lumpy investment. By using a rich employer-employee panel data set for two manufacturing industries and one service industry, we focus on simultaneous variations in output, capital, materials, man hours, labour productivity, and the skill composition and hourly cost of labour. Investment spikes are followed by roughly proportional changes in sales, labour, and materials, and significant increases in capital intensity. The changes in labour productivity that are associated with the investment spikes are small, which indicates that productivity improvements are not related to instantaneous technological change through investment spikes. Focusing on sectoral differences, capital adjustments are found to be smoother in the service industry than in the two manufacturing industries which may be related to differences in labour intensities between the industries. Copyright 2009 , Oxford University Press.

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Article provided by Oxford University Press in its journal Oxford Economic Papers.

Volume (Year): 61 (2009)
Issue (Month): 1 (January)
Pages: 104-127

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Handle: RePEc:oup:oxecpp:v:61:y:2009:i:1:p:104-127
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Cited by:

  1. Magne K. Asphjell & Wilko Letterie & Øivind A. Nilsen & Gerard A. Pfann, 2014. "Sequentiality Versus Simultaneity: Interrelated Factor Demand," The Review of Economics and Statistics, MIT Press, vol. 96(5), pages 986-998, December.
  2. Kapelko, Magdalena & Oude Lansink, Alfons & Stefanou, Spiro E., 2015. "Analyzing the impact of investment spikes on dynamic productivity growth," Omega, Elsevier, vol. 54(C), pages 116-124.
  3. Addison, John T. & Portugal, Pedro & Varejão, José, 2014. "Labor demand research: Toward a better match between better theory and better data," Labour Economics, Elsevier, vol. 30(C), pages 4-11.
  4. Øivind A. Nilsen & Arvid Raknerud & Marina Rybalka & Terje Skjerpen, 2011. "The Importance Of Skill Measurement For Growth Accounting," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 57(2), pages 293-305, 06.
  5. Marco Grazzi & Nadia Jacoby & Tania Treibich, 2016. "Dynamics of investment and firm performance: comparative evidence from manufacturing industries," Empirical Economics, Springer, vol. 51(1), pages 125-179, August.
  6. Xiaodan Yu & Giovanni Dosi & Marco Grazzi & Jiasu Lei, 2015. "Inside the Virtuous Cycle between Productivity, Profitability, Investment and Corporate Growth: An Anatomy of China Industrialization," LEM Papers Series 2015/03, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.

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