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Dynamic factor demand and irreversible adjustment in the Spanish milk sector

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  • David Alonso

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Abstract

The accession of Spain to the European Economic Community, now the European Union, entailed major changes for the milk sector. We try to determine whether the structural adjustment processes of the firm triggered by the changing environment present irreversibilities using a adjustment costs dual model. We modify the model proposed by Chang and Stefanou (1988) in order to incorporate a theoretically more robust treatment of the zero-investment regime in quasi-fixed factors. The empirical analysis reveals that strong irreversibilities are present in the adjustment processes: speeds of adjustment are distinct in investment and disinvestment processes, and there are zero-investment regimes. Copyright Springer-Verlag Berlin/Heidelberg 2005

Suggested Citation

  • David Alonso, 2005. "Dynamic factor demand and irreversible adjustment in the Spanish milk sector," Spanish Economic Review, Springer;Spanish Economic Association, vol. 7(4), pages 289-306, December.
  • Handle: RePEc:spr:specre:v:7:y:2005:i:4:p:289-306
    DOI: 10.1007/s10108-005-0105-y
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