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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. 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.
    2. repec:dgr:rugsom:99e13 is not listed on IDEAS
    3. 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.
    4. Busato, Francesco & Chiarini, Bruno & Marchetti, Enrico, 2011. "Indeterminacy, underground activities and tax evasion," Economic Modelling, Elsevier, vol. 28(3), pages 831-844, May.
    5. repec:dgr:rugsom:99e37 is not listed on IDEAS
    6. 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).
    7. 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).
    8. Vivek Ghosal & Yang Ye, 2013. "Business Decision-Making under Uncertainty: Evidence from Employment and Number of Businesses," CESifo Working Paper Series 4312, CESifo Group Munich.
    9. 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.
    10. 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.
    11. Chod, Jiri & Lyandres, Evgeny, 2011. "Strategic IPOs and product market competition," Journal of Financial Economics, Elsevier, vol. 100(1), pages 45-67, April.
    12. Ana MARTINEZ CANETE & Elena MÁRQUEZ-DE-LA-CRUZ & Inés PÉREZ-SOBA, "undated". "Asymmetries in wealth effect: the UK households evidence," EcoMod2010 259600113, EcoMod.
    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.

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