Aggregating Quasi-fixed Factors
The problem of aggregating quasi-fixed factors within the context of the adjustment-cost model is addressed. Two alternative theoretical justifications are considered, one based on a form of Hicks’ aggregation and the other on weak separability. It is argued that the latter is not relevant to practical situations. On the other hand, the former can be used to justify empirical dynamic factor demand studies which employ aggregated input categories. Some implications for data construction procedures are discussed.
KeywordsProduction Function Capital Stock Exhaustible Resource Rental Price Aggregate Capital
Unable to display preview. Download preview PDF.
- Berndt, E., Fuss, M. & Waverman, L.: A dynamic model of cost of adjustment and interrelated factor demands. Working Paper 7925, Institute for Policy Analysis, University of Toronto, Toronto, 1979.Google Scholar
- Blackorby, C. & Schworm, W. Multiple-grade models in the theory of exhaustible resources: Alternative characterizations and interpretations. Working Paper 80–31, University of British Columbia, Vancouver, 1980.Google Scholar
- Diewert, W. E.: Hicks’ aggregation theorem and the existence of a real value-added function. In Production economics: A dual approach to theory and applications (ed. M. Fuss and D. McFadden ). North-Holland, Amsterdam, 1978.Google Scholar
- Diewert, W. E.: Aggregation problems in the measurement of capital. In The measurement of capital (ed. D. Usher ). University of Chicago Press, Chicago, 1980.Google Scholar
- Dreyfus, S.: Dynamic programming and the calculus of variations. Academic Press, New York 1965.Google Scholar
- Epstein, L. G.: Aggregating quasi-fixed factors, Working Paper 8122, Institute for Policy Analysis. University of Toronto, Toronto, 1981 b.Google Scholar
- Epstein, L G.: Intertemporal price indices for the firm. Journal of Economic Dynamics and Control, 1983, forthcoming.Google Scholar
- Epstein, L. & Denny, M.: The multivariate flexible accelerator model: Its empirical restrictions and an application to U.S. manufacturing, Econometrica, 1983, forthcoming.Google Scholar
- Hicks, J.: Value and capital, 2nd ed. Clarendon Press, Oxford, 1946.Google Scholar
- Pindyck, R. & Rotemberg, J.: Dynamic factor demands, energy use, and the effects of energy price shocks. Energy Laboratory Working Paper No. MIT-EL 82–024 WP. MIT, Cambridge, 1982.Google Scholar