On Input Market Frictions and Estimation of Factors' Demand

In this article, we explore the impact of imperfectly competitive input markets on production function estimation. First‐order profit‐maximizing conditions are altered when frictions in input markets cause the elasticity of input supply to the firm to be finite. A consequence of this is that the standard econometric model used for production function estimation will be misspecified. We prove that, in all nontrivial cases, finite elasticities of supply to the firm will lead to inconsistent estimates of production function parameters. Monte Carlo simulations show that the resulting bias can be economically significant.     

上海市就业变动的实证分析——基于VAR模型

文章运用协整检验模型、VAR模型、脉冲响应分析等实证方法对上海市就业弹性系数与经济增长、产业结构变动、生产要素投入之间的关系进行检验。结果显示,经济增长、第二产业及第三产业的发展使就业弹性系数上升,促进了上海市就业增加。近年来经济增长及第二产业的发展逐渐进入了稳态,对促进就业的效应出现了边际递减,资本投入的增加对劳动力产生替代,影响了就业的稳定性;长期趋势来看,第三产业的就业吸纳能力强于二产业,产业结构变动的就业创造效应会增强。     

Substitutions among energy imputs in U.S. manufacturing

Summary and Conclusion With cross-section data on the purchases of four energy inputs by 11 U.S. manufacturing industries, Allen partial cross elasticities of input substitution and own price elasticities of demand were computed. The sample set represents 85 percent of total manufacturing energy demand in 1962. The substitution elasticities between fuel oil and natural gas, fuel oil and purchased electricity, and between natural gas and electricity, were statistically significant for about half of the 11 two-digit SIC industries studied. These elasticities ranged between 12.9 and 1.7 with half of them less than 4.0.Importantly, the elasticity of substitution between coal and the above three energy inputs was significantly different from zero in only three manufacturing industries (comprising some 35 percent of total manufacturing energy demand). Thus it would appear that only three U.S. manufacturing sectors will contribute towards the substitution of domestic for international energy sources. Indirect substitution between energy sources, with the consequent implications for the balance of payments, will primarily have to come from the substitution of electricity (from coal-fired plants) for natural gas (from Canada) and fuel oil (indirectly from the Middle East, Africa, and Latin America).Similar substitution results were found when all 11 industries were aggregated together or divided into large and small energy demand groups. As well, there appear to be no significant differences in overall substitution response between the two categories of large and small energy users. Supporting the substitution results, we found that the own price elasticity of demand for coal to be about –.5 and not different from zero while the price elasticities for natural gas, fuel oil, and purchased electricity were between –.7 and –2.67 (and statistically different from zero).As a general conclsuion, the substitution of domestic coal for other energy inputs will primarily have to come indirectly through greater use of coal to produce electricity which is purchased by the manufacturing sector. The scope for direct substitution of coal for other energy inputs in U.S. manufacturing is limited to only three sectors and cannot be expected to have an exceptionally large impact on mitigating the inflation and blanace of payments implications of the recent increases in the price of imported energy inputs.This work was undertaken at the Bureau of Economic Analysis. Discussions with George Green, A. Ray Grimes, Jr., Michael Mohr, John R. Moroney, Gorti Narasimham, and Benjamin Wolkowitz are acknowledged. These individuals, as well as the B.E.A. and the author's present employer, remain independent from the views expressed in this study.     

An estimate of aggregate supply response in South African agriculture

Agricultural supply has traditionally been assumed to be relatively inelastic. Time series estimates have generally supported this hypothesis. Estimates based on cross‐sectional observations have generally yielded higher elasticities. It has been argued that cross‐sectional analyses are more appropriate than time series analyses for estimating long‐run elasticities. A cross‐sectional analysis was done on South African data. Quantity supplied was shown to be a function of output/input price ratios, land quality, average rainfall and time. The long‐run supply elasticity appears to be approximately 0,92. This has important implications for agricultural price policy. Policies based on the assumption of very low supply elasticities are likely to distort markets and production.     

金融危机对日本进口汇率传导弹性的影响分析

本文通过对金融危机后的日本进口汇率弹性进行实证研究,结果表明大部分行业的进口汇率传导弹性出现了明显的上升,而机械类行业(一般机械、运输设备和精密仪器)则出现了下降,并且这些变化是在短时间内实现的。本文认为此次金融危机和日元汇率变化特征是汇率弹性急剧变化的原因,而需求价格弹性和企业内贸易的行业差别可能是导致汇率弹性变化方向不一致的根源。     

Allocative inefficiency and measures of market power

Conclusion This paper has shown that under conditions of both linear and constant price elasticity demand functions, market power as measured by the Lerner index and profit rates may easily move in the opposite direction of the welfare losses from monopoly. This means that changes in monopoly power, as measured by either Lerner indexes or profit rates, are not adequate to predict qualitative changes in allocative inefficiency.More (less) market power does not necessarily imply more (less) allocative inefficiency whether one is comparing different industries at a point in time or a given industry at different points in time. For these reasons, interpretation of the relation between market power as measured by the Lerner index or profit rates and market performance must proceed with caution.     

Estimating Firm Behavior under Rationing: a Panel Data Study of the Chinese Manufacturing Industry

The purpose of this paper is to investigate the impacts of rationing on firm behavior. A virtual price approach is adopted to derive the rationed elasticities of variable input demands and output supply under a translog profit function. To illustrate the difference between the rationed and unrationed elasticities, we conduct an analysis using a firm-level annual survey data of China over the period 1985–88. Our estimation results indicate that the values of most elasticities would have been affected significantly if the government had imposed rationing on material inputs. The behavior of Chinese firms would have been seriously distorted in a complicated way. The firms would have over-responded to market signals in making some of their input or output decisions and, at the same time, might have under-reacted, or would have not changed their reaction, in making the other input or output decisions, under a rationing regime.     

Self-selection and performance of R&D input of heterogeneous firms: Evidence from China's manufacturing industries

Applying the theories of heterogeneous firms and the propensity score matching difference-in-differences (PSM-DID) method to a rich dataset of Chinese manufacturing firms, this paper examines the self-selection of firm-level R&D input and estimates the net effect of R&D on productivity. The analysis shows that (1) for Chinese manufacturing firms as a whole, R&D input is influenced by firm productivity: more productive firms are more likely to invest in R&D; (2) controlling for the self-selection effect, the net output elasticities of R&D input in one year and two years after R&D input are 3.92% and 5.25%, respectively; (3) although state-owned enterprises (SOEs) are more likely than all other ownership groups to invest in R&D, the R&D input is not productive; (4) although enterprises owned by investors outside of Mainland China are the least likely to invest in R&D, the output elasticity of R&D is more significant and larger in this group than in SOEs and privately owned Chinese firms; and (5) surprisingly, the net effect of R&D is not significant in high-tech industries. Policy implications are derived from the findings.     

Behavior of a firm which maximizes the rate of profit: Specific features

The author challenges the well-known assumption of the modern microeconomic theory, stating that the maximization of economic profit is a natural aim of a firm. The article asserts that the behavior of a firm controlled by private owners of capital should be linked to the firm’s desire to maximize the rate of profit. The return to the interpretation of a capitalist firm’s motivation, which is characteristic of the period of the classical political economy, makes it necessary to reconsider some established views, namely, the demand for physical capital by a firm; the optimal combination of production factors used; the scale of output, which maximizes the firm’s objective function; and the character of the firm’s cost functions (both economic and accounting). The conclusions drawn by the author also have some practical significance. A deep understanding of the genuine economic aims and motives, which determine the behavior of different types of firms, is especially important for a government searching for the optimal use of its assets.     

Farm credit and credit demand elasticities in Shaanxi and Gansu

This paper empirically estimates individual household credit demand elasticities based on 897 farm households surveyed in Shaanxi and Gansu provinces in the People's Republic of China (PRC) in October 2009. We used survey-based experimental techniques to extract individual household credit demand functions from which we estimated point demand elasticities. From a theoretical point of view, we proposed that as interest rates fell the demand for credit increased in elasticity, and this appears to hold in our data. We find a range of elasticities with mean point estimates of about ? 0.6. We find that nearly 20% of farm households have nearly perfectly inelastic demands for credit but we also find that nearly 20% have elasticities above ? 0.75 including some 15% that have elasticities greater than ? 1.0. Previous studies that have argued against credit policies because of the low inelasticity of demand do not generally hold. There is much heterogeneity in credit demand and we would argue that a full spectrum of targeted credit policies can be used to address differences across farms.     

Sectoral elasticities of substitution between labour and capital in venezuelan manufacturing: A cross-sectional micro analysis

This paper presents estimates of the elasticities of substitution between capital and labour for 19 Venezuelan manufacturing industries. The elasticities are estimated using micro data collected from the 1970 Venezuelan Census of Manufacturing. Estimates of these elasticities are generally not significantly different from unity. This suggests that the traditional view of limited substitution possibilities in manufacturing sectors of less developed countries does not apply in the Venezuelan case. Moreover, the Cobb-Douglas functional specification may be appropriate for estimating industrial production functions. In addition, the ‘market’ position in the current ‘structuralist versus market’ controversy concerning the labour absorption problem plaguing LDCs is supported.     

Optimal Two‐Part Pricing in a Carbon Offset Market: A Comparison of Organizational Types

This article examines the optimal two‐part pricing by an intermediary in a carbon offset market. In addition to creating a framework for analyzing carbon offset pricing, this article makes two contributions to the theoretical literature. First, we provide an in‐depth examination of the roles played by the upstream inframarginal supply and participation elasticities and the downstream demand elasticity in determining the optimal two‐part pricing strategy. Second, we compare the pricing decisions of three different organizational types: a for‐profit firm, a public agency, and a producer association. The producer association problem, which has received little attention in the literature, yields counterintuitive results because a producer association must simultaneously reduce output and distribute all profits back to its members.     

基于就业视角的山西产业结构调整与对策

劳动力市场上,劳动动力需求的最大特征就是其派生性,因此地区产业结构的调整必将对劳动力的需求产生很大影响,并进而影响劳动力市场的就业和稳定。本文分析了对于山西这样的资源型城市在转型过程中,应优先考虑重点发展就业弹型大的劳动密集型产业、第三产业以及关联度高的产业等,从而使得产业结构调整中所创造的新的劳动力需求能够与供给相匹配,从而避免给劳动力市场带来巨大冲击与影响。     

Changing Elasticities of Labor Demand in U.S. Manufacturing

This paper provides a link between long-standing labor demand elasticity estimates in U.S. manufacturing and recent studies of wage patterns and labor demand shifts in response to technical change and international trade. We document asymmetric changes in labor demand elasticities including an absolute and relative increase in own-wage elasticity of demand for production workers. Separate estimates of substitution and scale responses imply that skill-biased technical change dominates increased product market competition as a source of the observed changes in labor demand elasticity.     

Job destruction and creation: Labor reallocation entailed by the clean air action in China

Understanding the mechanism of labor reallocation during the implementation of environmental regulations is important for countries to stabilize employment. Using city-level data and listed firm-level data from 2005 to 2019, we investigated the labor reallocation entailed by the Clean Air Action (CAA) from 2013 to 2017 in China, and found that the CAA substantially reduced labor demand in regulated cities and listed firms. Notably, the CAA has entailed different levels of job destruction and job creation across time, industries, and firm types, boosting labor reallocation. Firstly, the effect of the CAA on labor demand was time-varying, as labor demand first decreased and then recovered from 2013 to 2019. Secondly, the CAA generated a greater job destruction in polluting industries and their downstream industries, and job creation in clean industries. Lastly, thanks to the CAA firms have increased the hiring of highly skilled workers, although equipment upgrades have reduced labor demand, especially in polluting firms.     

Energy consumption of urban households in China

We estimate China urban household energy demand as part of a complete system of consumption demand so that it can be used in economy-wide models. This allows us to derive cross-price elasticities unlike studies which focus on one type of energy. We implement a two-stage approach and explicitly account for electricity, domestic fuels and transportation demand in the first stage and gasoline, coal, LPG and gas demand in the second stage. We find income inelastic demand for electricity and home energy, but the elasticity is higher than estimates in the rich countries. Demand for total transportation is income elastic. The price elasticity for electricity is estimated to be −0.5 and in the range of other estimates for China, and similar to long-run elasticities estimated for the U.S.     

Strategic Intrafirm Innovation Adoption and Diffusion

A theory of oligopolistic innovation adoption is developed in which intrafirm diffusions occur because the marginal cost of adoption is increasing in the rate of adoption. The equilibrium intrafirm diffusion curve is S-shaped or concave, as are empirically observed ones. This diffusion curve is more likely to be S-shaped the more competitive the industry, the larger the marginal cost of adoption or the pre-innovation unit cost of production, or the smaller the demand. The diffusion is longer, and so the extent of adoption at any date is lower the more competitive the industry, the larger the marginal cost of adoption or the pre-innovation unit cost of production, or the smaller the demand. A surprising result is that an increase in the unit cost reduction from the innovation has an ambiguous effect on diffusion. Obviously, a larger cost reduction allows each firm to earn a larger flow profit at every date from the same rate of adoption. However, a more subtle effect is that it also allows the firm to earn the same flow of profit with a slower rate of adoption, and so lower adoption costs. That is, the firms also have an incentive to spread out the diffusion over a longer period of time to save on adoption costs.     

Projecting meat and cereals demand for China based on a meta-analysis of income elasticities

There are many projections for China's food demand, and the projection results differ significantly from each other. Different values for income elasticities could be a major reason. This study projects meat and cereals demand for China based on a meta-analysis of the income elasticity estimates using a collection of 143 and 240 income elasticity estimates for cereals and meat products, respectively, from 36 primary studies. We find that income elasticities for most cereals (general cereals, rice, and coarse grains) and all meat products (general meat, pork, poultry, beef & mutton) tend to decline as per capita income increases, except for wheat, which increases. Taking this into account, differences between consumption projections based on time-varying income elasticities and values based on constant elasticities are substantial in quantities and increase over time.     

Real wages,investment and employment: New evidence from West German sectoral data

Real Wages, Investment and Employment: New Evidence from West German Sectoral Data. — Non-separable capital adjustment costs imply that investment directly affects the demand for labour and therefore justify not only the lagged dependent variable but also the presence of investment expenditures or Tobin’s valuation ratio Q in labour demand estimation. On this basis, the authors estimate a very parsimonious specification of demand for blue-collar workers in a panel of 32 West German industries. They find much larger short-run real wage employment elasticities than previous research, and robustly significant positive effects of investment or Tobin’s Q on labour demand.     

Some aspects of employment in Indian agriculture

The purpose of this study is to examine the effects of structural differences (due to size of holding) on employment in Indian agriculture. Translog cost function is applied, and restrictions are tested using a likelihood ratio test. For small- and medium-size farms, joint estimation of a non-homothetic cost function with cost share equations is conducted, and Allen elasticities of substitution and price elasticities of demand for eight different inputs are derived. Inputs are classified as substitutes and complements using Slutsky-Hicks-Allen-Schultz definition. Each source of labor against hired labor is a substitute for small farms (0–5 hectares). Some policy analysis of rural employment and a fertilizer subsidy scheme is presented using price elasticities of demand for small and medium farms.