Working Paper: NBER ID: w1899
Authors: Matthew D. Shapiro
Abstract: 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.
Keywords: No keywords provided
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| factor prices (F16) | capital demand (E22) |
| interest rates (E43) | capital demand (E22) |
| factor prices (F16) | investment decisions (G11) |
| interest rates (E43) | investment decisions (G11) |
| changes in factor prices (F16) | demand for capital (E22) |
| capital stock (E22) | investment decisions (G11) |