A Dynamic Factor Demand Model for the Swedish Pulp Industry, 1998
In this paper we specify and estimate a dynamic factor demand model for the Swedish pulp industry. Firms are assumed to have rational expectations and costs of adjustment will arise when the capital stock is altered. The estimates are based on plant level panel data for the period 1972-1990. We find weak evidence of the presence of adjustment costs. All the estimated own price elasticities are negative and the empirical cost function have all the desired properties from theory. The result suggest that user cost of capital is a significant determinant of pulp industry investment, while output level is not. We also find that pulp industry investment is insensitive to variations in the price of electricity.
|Date of creation:||18 Oct 1998|
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