ESTIMATION OF THE DYNAMIC FACTOR DEMAND SYSTEM IN THE JAPANESE IRON AND STEEL INDUSTRY
1992 Volume 43 Issue 2 Pages 165-176
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1992 Volume 43 Issue 2 Pages 165-176
In this paper, the dynamic factor demand system that is derived from a firm's dynamic optimization behavior in the presence of adjustment costs is estimated for the Japanese iron and steel industry. The main estimation results we obtain are as follows;
(1) The data indicate that adjustment costs for labor are much less important than those for capital.
(2) We find that the demands for materials, energy and labor have become more responsive to changes in their own prices through the first and second oil crises, while the demand for capital has become less responsive to changes in each price.
(3) It is found that capital and energy are substitutes in the long run.
