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Factor demand modelling: the theory and the practice

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  • Claudio Morana

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Abstract

Since the work of Cobb and Douglas [18], two main innovations have been introduced in applied factor demand analysis, i.e. the use of flexible functional forms and the modelling of dynamics, expectations, and the interrelatedness of the adjustment process. Recently, cointegration theory has provided an additional important contribution, yielding empirical content to the notion of equilibrium employed in economic analysis, encompassing both the idea of centre of gravity relationship, suggested byClassical economists, and the notion of market-clearing position, employed by Neoclassical economist. Also in the light of the most recent generalizations of the concept of cointegration, allowing for economic attractors changing over time, as the evolution of the structural features of the economy proceeds, this paper critically assess the key theoretical and empirical issues in factor demand analysis.

Suggested Citation

  • Claudio Morana, 2007. "Factor demand modelling: the theory and the practice," ICER Working Papers 9-2007, ICER - International Centre for Economic Research.
  • Handle: RePEc:icr:wpicer:9-2007
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    File URL: http://www.biblioecon.unito.it/biblioservizi/RePEc/icr/wp2007/ICERwp9-07.pdf
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    References listed on IDEAS

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    1. Holly, Sean & Smith, Peter, 1989. "Interrelated factor demands for manufacturing: A dynamic translog cost function approach," European Economic Review, Elsevier, vol. 33(1), pages 111-126, January.
    2. Nadiri, M Ishaq & Rosen, Sherwin, 1969. "Interrelated Factor Demand Functions," American Economic Review, American Economic Association, vol. 59(4), pages 457-471, Part I Se.
    3. Hall, Stephen G & O'Sullivan, John, 1994. "Forecasting Economies in Transition: The Case of Romania," Economic Change and Restructuring, Springer, vol. 27(3), pages 175-184.
    4. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    5. Nickell, Stephen, 1985. "Error Correction, Partial Adjustment and All That: An Expository Note," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 47(2), pages 119-129, May.
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    Cited by:

    1. Khayyat, Nabaz T. & Lee, Jongsu & Lee, Jeong-Dong, 2014. "How ICT Investment Influences Energy Demand in South Korea and Japan?," MPRA Paper 55454, University Library of Munich, Germany.

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