4 Dynamic Factor Demand Models and Productivity Analysis (original) (raw)
We would like to thank, in particular, William Baumol and Dale Jorgenson, and the parti-
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This dissertation is the result of a combination of micro-economic analysis and econometric techniques. Starting point was the wish to investigate (theoretically and empirically) how internal adjustment costs and market imperfections might influence the adjustment of factor inputs. Therefore appropriate models of firm behaviour had to be constructed and their properties had to be studied. In order to estimate the resulting factor demand equations, data had to be collected and estimation procedures had to be programmed. It is clear that this work could not have been done without the help of others. In the first place I would like to thank Dr. A. L. Hempenius who suggested me the subject of this study and who was most interested in its further progress. The thorough discussions with him and his careful reading of and critical comments on preliminary drafts were a great help for me. Mr. F. v.d. Munckhof did an excellent job in collecting the data used in this research project. The assistance of the Programming Department of the Tilburg Computing Center should also be mentioned. I am especially grateful to Ir. T. de Beer and Ir. A. Markink who were so kind as to programm some necessary estimation procedures. Professors v. d. Genugten and de Jong made valuable comments on sections of this study. Finally I would like to thank all colleagues of the de-Dartment of Econometrics; in discussions with them I learned the profession. Footnotes to Chapter 1 2. Dynamic Optimal Factor Demand under Financial Constraints 2.1. Introduction 2.2. Specification of the object function and form of the financial constraints 2.3. The optimal adj ustment path 2.3.1. The Lagrangian function 33 2.3.2. Zero marginal adjustment costs 36 2.3.3. Positive marginal adjustment costs 2.4. Conclusion 48 Footnotes to Chapter 2 III 3. Imperfect Competition and Rigid Wage Forming on the Labour Market (s) and the Adjustment of Factor Inputs 53 3.1. Introduction 53 3.2. A strong disequilibrium model 3.2.1. Assumptions and definitions 3.2.2. A static model with supply constraints 57 3.2.3. A dynamic model with supply constraints 3.3. A weak disequilibrium model 63 3.3.1. Oligopsonistic labour markets 3.3.2. A dynamic model with an oligopsonistic labour market 3.3.3. The analysis of the optimal adjustment path under positive marginal adj ustment costs and labour constraints effective in the first k periods 3.4. Conclusions 82 Footnotes to Chapter 3 84 4. An Econometric Specification of the Factor Demand Model 93 4.1. The specification of factor demand equations under financial and labour supply restrictions 93 4.1.1. Replacement investments 4.1.2. A model with financial and labour supply restrictions 4.1.3. A multivariate adjustment model with cyclical components 4.1.4. The structural model 4.2. Further specification problems 4.2.1. The specification of the product demand curve 101 4.2.2. Form of the revenue function and specification of optimal inputs 101 4.2.3. Technical progress, factor substitution and vintage production function 106 4.2.4. Forecasting schemes 107 4.2.5. The specification of the labour market variables 108 4.2.6. The specification of the debt capacity 111 IV 4.2.7. The specification of the factor demand model 112 4.2.7.1. Introduction 112 4.2.7.2. The proportional adjustment model 113 4.3. Stochastic specification 117 4.3.1. The specification of the error processes of the adjustment model and the rational expectations model 117 4.3.2. Simultaneity problems 118 4.3.3. Errors in variables 119 S.3.4. Systematic and random parameter variation 119 4.3.4.1. Systematic parameter variation 119 4.
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