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Lumpy Investments, Factor Adjustments and Productivity

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Abstract
This paper describes firms' output and factor demand before, during and after episodes of lumpy investments using a rich employer-employee panel data set for two manufacturing industries and one service industry. We focus on the simultaneous adjustment of capital, materials, man-hours, as well as the skill composition and hourly cost of labour. The investment spikes lead to roughly proportional changes in sales, labour and materials, while capital intensity increases significantly. Capital adjustments are found to be smoother in the service industry than in the two manufacturing industries, a difference that may be related to the labour intensity in the service industry. Finally, the changes in productivity associated with episodes of investment spikes are small, indicating that productivity improvements are related to learning-by-doing rather than instantaneous technological changes through investment spikes.

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  • Øivind A. Nilsen & Arvid Raknerud & Marina Rybalka & Terje Skjerpen, 2005. "Lumpy Investments, Factor Adjustments and Productivity," Discussion Papers 441, Statistics Norway, Research Department.
    • Handle: RePEc:ssb:dispap:441
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    Cited by:

    1. Øivind A. Nilsen & Arvid Raknerud & Marina Rybalka & Terje Skjerpen, 2008. "Skill Composition: Exploring a Wage-based Skill Measure," Discussion Papers 531, Statistics Norway, Research Department.
    2. Sandra Martina Leitner, 2008. "Interrelatedness, Dynamic Factor Adjustment Patterns and Firm Heterogeneity in Austrian Manufacturing," Economics working papers 2008-03, Department of Economics, Johannes Kepler University Linz, Austria.

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    More about this item

    Keywords

    Lumpy investments; Adjustment costs; Productivity; Panel data;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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