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A Vintage Model of Labour Demand by UK Manufacturing

In: Unemployment in Europe

Author

Listed:
  • J. Ansar
  • A. Ingham
  • M. Toker
  • A. Ulph

Abstract

The conventional model of factor demand has firms choosing the technique of production and mix of factor inputs to minimise the cost of producing some given level of output for an exogenously determined set of factor prices and a given set of technical know-how. In this simple model, firms are free to vary the mix of factors each period. Unemployment then occurs as a feature of labour-market failure. For otherwise wage rates would adjust so that supply equalled demand. A vintage model takes account of the fact that some factors are durable, and this means that it is important to take account of two different decisions on factor choice. Firms will make an ex ante choice of techniques at the time that new capital is installed - e.g. will firms use automated energy-intensive or labour-intensive production methods? Once that piece of capital is installed, firms may be able subsequently to alter the mix of factors, but their ability to do so is now constrained by the ex ante choice of technique. This second decision is the ex post decision.

Suggested Citation

  • J. Ansar & A. Ingham & M. Toker & A. Ulph, 1989. "A Vintage Model of Labour Demand by UK Manufacturing," Palgrave Macmillan Books, in: Joan Muysken & Chris Neubourg (ed.), Unemployment in Europe, chapter 3, pages 60-85, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-19795-8_5
    DOI: 10.1007/978-1-349-19795-8_5
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