The Dynamic Demand for Capital and Labor
A model of the dynamically interrelated demand for capital and labor is specified and estimated. The estimates are of the first-order conditions of the firm's problem rather than of the closed-form decision rules. This use of the first-order conditions allows a random rate of return and a flexible specification of the technology. The estimates do not imply the very slow rates of adjustment displayed in other, related estimates of the demand for capital. Because adjustment is estimated to be rapid, there is,contrary to the standard view, scope for factor-prices to affect investment at relatively high frequencies.
|Date of creation:||Apr 1986|
|Date of revision:|
|Publication status:||published as Shapiro, Matthew D."The Dynamic Demand for Capital and Labor," Quarterly Journal of Economics, Vol. 101, No. 3, August 1986, pp. 513-542.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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