Time-to-build. Interrelated investment and labour demand modelling. With applications to 6 OECD countries (Q1346639)

In this book dynamics in labor demand and investments in physical capital and inventories are investigated together with their interrelations. By carrying out investigations concerning different countries and sectors the importance of gestation lags and interrelations of production factors are tested and comparisons between the results are made. This book has 6 chapters. Chapter 1 provides background information of neoclassical modelling of factor demand. In chapter 2, data from the Dutch and French construction industry yield information of large investment projects. It is assumed that construction lags and/or delivery lags exist, and what length they have. In chapter 3, a neoclassical factor demand model with structures, equipment and labor is specified including time-to-build for structures and adjustment costs for all production factors. A closed form solution is derived and applied to the manufacturing industry of the United States and the Netherlands. An interrelation is assumed between the three production factors structures, equipment and labor. With the model it is not possible to obtain full information maximum likelihood estimates. In principle, maximum likelihood is feasible. However, a dynamic, highly nonlinear model results with many high order moving average disturbance terms that humper convergence. A conditional method is therefore used by which the dynamics resulting from time-to-build are imposed and not estimated. In chapter 4, a model with the addition of more interrelations in the production and adjustment costs is specified. The necessary conditions for the model are estimated by an instrumental estimation method. To test the model specification, data from the manufacturing industry of the United States, the United Kingdom, West-Germany, France and the Netherlands are used. Chapter 5 investigates the role of inventories in the three different econometric models. The solutions of the models are estimated with aggregate data from five French industrial sectors. The specification and the estimation results of the three models are compared. The objectives of entrepeneurs concerning inventories and the interrelation with capital stock and labor is investigated. Time-to-build for capital stock is incorporated. Chapter 6 summarizes the results.