Lumpy investments, factor adjustments and productivity
Working paper
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Date
2006-02Metadata
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- Discussion papers (SAM) [660]
Abstract
This paper describes firms’ output and factor demands before, during and after episodes of
lumpy investment. By using a rich employer–employee panel data set for two manufacturing
industries and one service industry, we focus on simultaneous variations in output, capital,
materials and man hours, as well as the skill composition and hourly cost of labour.
Investment spikes are followed by roughly proportional changes in sales, labour and
materials, and significant increases in capital intensity. Capital adjustments are found to be
smoother in the service industry than in the two manufacturing industries. This result may be
related to differences in labour intensity between the industries. The changes in productivity
that are associated with the investment spikes are small, which indicates that productivity
improvements are not related to instantaneous technological change through investment spikes.
Publisher
Norwegian School of Economics and Business Administration. Department of EconomicsSeries
Discussion paper2006:9