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Demand Uncertainty and the Capital-Labor Ratio: Evidence from the U.S. Manufacturing Sector

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  • Ghosal, Vivek

Abstract

Richard Hartman (1976) and Duncan M. Holthausen (1976) showed that firms' input choices may be affected by demand uncertainty. Specifically, uncertain demand conditions may lead to firms operating with a lower capital-ratio. This result has potentially important implications for the analysis of factor demand and factor productivity. The author constructs measures of demand uncertainty and examines the above relationship for a sample of 125 U.S. manufacturing industries. Results show that there exists a significant negative relationship between demand uncertainty and the capital-labor ratio. Copyright 1991 by MIT Press.

Suggested Citation

  • Ghosal, Vivek, 1991. "Demand Uncertainty and the Capital-Labor Ratio: Evidence from the U.S. Manufacturing Sector," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 157-161, February.
    • Handle: RePEc:tpr:restat:v:73:y:1991:i:1:p:157-61
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    Cited by:

    1. Lensink, Robert & Murinde, Victor & Green, Christopher J., 1999. "Are Polish firms risk-averting or risk-loving? : evidence on demand uncertainty and the capital-labour ratio in a transition economy," Research Report 99E13, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    2. Busato, Francesco & Chiarini, Bruno & Marchetti, Enrico, 2011. "Indeterminacy, underground activities and tax evasion," Economic Modelling, Elsevier, vol. 28(3), pages 831-844, May.
    3. Hossain, A K M Nurul & Serletis, Apostolos, 2020. "Technical change in U.S. industries," Economic Modelling, Elsevier, vol. 91(C), pages 579-600.
    4. Lensink, Robert, 1999. "Uncertainty, financial development and economic growth: an empirical analysis," Research Report 99E37, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    5. Sharon Belenzon & Victor Manuel Bennett & Andrea Patacconi, 2019. "Flexible Production and Entry: Institutional, Technological, and Organizational Determinants," Strategy Science, INFORMS, vol. 4(3), pages 193-216, September.
    6. John Robst & Kimmarie McGOLDRICK, 1999. "The Measurement of Firm Information About Product Demand," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 15(2), pages 149-163, September.
    7. Chod, Jiri & Lyandres, Evgeny, 2011. "Strategic IPOs and product market competition," Journal of Financial Economics, Elsevier, vol. 100(1), pages 45-67, April.
    8. Sharon Belenzon & Victor Manuel Bennett & Andrea Patacconi, 2019. "Flexible Production and Entry: Institutional, Technological, and Organizational Determinants," NBER Working Papers 25659, National Bureau of Economic Research, Inc.
    9. Vivek Ghosal & Yang Ye, 2013. "Business Decision-Making under Uncertainty: Evidence from Employment and Number of Businesses," CESifo Working Paper Series 4312, CESifo.
    10. Vivek Ghosal & Yang Ye, 2015. "Uncertainty and the employment dynamics of small and large businesses," Small Business Economics, Springer, vol. 44(3), pages 529-558, March.
    11. repec:dgr:rugsom:99e13 is not listed on IDEAS
    12. Ghosal, Vivek & Ye, Yang, 2019. "The impact of uncertainty on the number of businesses," Journal of Economics and Business, Elsevier, vol. 105(C).
    13. Green, Christopher J. & Lensink, Robert & Murinde, Victor, 2001. "Demand uncertainty and the capital-labour ratio in Poland," Emerging Markets Review, Elsevier, vol. 2(2), pages 184-197, June.
    14. Martina Novotná & Ivana Faltová Leitmanová & Jiří Alina & Tomáš Volek, 2020. "Capital Intensity and Labour Productivity in Waste Companies," Sustainability, MDPI, vol. 12(24), pages 1-15, December.
    15. Ana MARTINEZ CANETE & Elena MÁRQUEZ-DE-LA-CRUZ & Inés PÉREZ-SOBA, 2010. "Asymmetries in wealth effect: the UK households evidence," EcoMod2010 259600113, EcoMod.
    16. Peeters, Marga, 1997. "Does demand and price uncertainty affect Belgian and Spanish corporate investment?," MPRA Paper 23604, University Library of Munich, Germany.
    17. Hongsheng Fang & Wen‐Quan Hu & Ruhua Shi & Xufei Zhang, 2023. "The Chinese‐style macroeconomic control: The role of state‐owned enterprises," The World Economy, Wiley Blackwell, vol. 46(3), pages 702-725, March.
    18. Mark J. Koetse & Henri L.F. de Groot & Raymond J.G.M. Florax, 2006. "The Impact of Uncertainty on Investment: A Meta-Analysis," Tinbergen Institute Discussion Papers 06-060/3, Tinbergen Institute.
    19. Andrew Hanson & Shawn Rohlin, 2011. "The Effect of Location-Based Tax Incentives on Establishment Location and Employment across Industry Sectors," Public Finance Review, , vol. 39(2), pages 195-225, March.
    20. Ana Faria & Paul Fenn & Alistair Bruce, 2002. "Determinants of adoption of flexible production technologies: Evidence from portuguese manufacturing industry," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 11(6), pages 569-580.
    21. repec:dgr:rugsom:99e37 is not listed on IDEAS

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