Working Paper: NBER ID: w1900
Authors: Matthew D. Shapiro
Abstract: A firm may acquire additional caoital input by purchasing new capital or by increasing the utilization of its current capital. The margin between capital accumulation and capital utilization is studied in a model of dynamic factor demand where the firm chooses capital, labor, and their rates of utilization. A direct measure of capital utilization --the workweek of capital--is incorporated into the theory and estimates. The estimates imply that capital stock is costly to adjust while the work week of capital is essentially costless to adjust. The estimated response of the capital stock to changes in its price and in the required rate of return is more rapid than found in other estimates.
Keywords: Capital Utilization; Capital Accumulation; Dynamic Factor Demand; Investment Decisions
JEL Codes: E22; E32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| capital utilization (G31) | capital accumulation (E22) |
| capital stock adjustment (E22) | capital utilization (G31) |
| factor prices (F16) | capital demand (E22) |
| required rate of return (G17) | capital demand (E22) |
| capital utilization (G31) | work week of capital (P12) |
| work week of capital (P12) | productivity of shift work (J22) |