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How do firms adjust production factors to the cycle?

Author

Listed:
  • Cette Gilbert

    (Banque de France, Université Aix-Marseille (Aix-Marseille School of Economics), CNRS et EHESS, Paris, France)

  • Lecat Rémy

    (Banque de France – 39, rue Croix-des-Petits-Champs – 75001, Paris, France)

  • Ahmed Jiddou Ahmed Ould

    (Banque de France and ENSAE, Paris, France)

Abstract

This paper studies the adjustment of production factors to the cycle taking into account factor utilization in multiple dimensions (labor working time, capital operating time and capital capacity utilization) and examines the impact of obstacles to increasing capital operating time on this adjustment path. Factor utilization adjusts the most rapidly, first through capital capacity utilization and capital operating time and then labor working time. The adjustment is slow for the number of employees and even slower for the capital stock. Obstacles to increasing capital operating time lead to a slower adjustment of capital operating time, offset by a stronger adjustment of capacity utilization.

Suggested Citation

  • Cette Gilbert & Lecat Rémy & Ahmed Jiddou Ahmed Ould, 2016. "How do firms adjust production factors to the cycle?," The B.E. Journal of Macroeconomics, De Gruyter, vol. 16(2), pages 361-394, June.
    • Handle: RePEc:bpj:bejmac:v:16:y:2016:i:2:p:361-394:n:1
    DOI: 10.1515/bejm-2014-0099
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    References listed on IDEAS

    as
    1. Gilbert Cette & Nicolas Dromel & Rémy Lecat & Anne-Charlotte Paret, 2015. "Production Factor Returns: The Role of Factor Utilization," The Review of Economics and Statistics, MIT Press, vol. 97(1), pages 134-143, March.
    2. Nadiri, M Ishaq & Rosen, Sherwin, 1969. "Interrelated Factor Demand Functions," American Economic Review, American Economic Association, vol. 59(4), pages 457-471, Part I Se.
    3. Daniel S. Hamermesh & Gerard A. Pfann, 1996. "Adjustment Costs in Factor Demand," Journal of Economic Literature, American Economic Association, vol. 34(3), pages 1264-1292, September.
    4. Gilbert Cette & Christian Clerc & Lea Bresson, 2015. "Contribution of ICT Diffusion to Labour Productivity Growth: The United States, Canada, the Eurozone, and the United Kingdom, 1970-2013," International Productivity Monitor, Centre for the Study of Living Standards, vol. 28, pages 81-88, Spring.
    5. Gilbert Cette & Jimmy Lopez, 2012. "ICT demand behaviour: an international comparison," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 21(4), pages 397-410, June.
    6. Gilbert Cette & Nicolas Dromel & Rémy Lecat & Anne-Charlotte Paret, 2015. "Production Factor Returns: The Role of Factor Utilization," The Review of Economics and Statistics, MIT Press, vol. 97(1), pages 134-143, March.
    7. Marcela Eslava & John Haltiwanger & Adriana Kugler & Maurice Kugler, 2010. "Factor Adjustments after Deregulation: Panel Evidence from Colombian Plants," The Review of Economics and Statistics, MIT Press, vol. 92(2), pages 378-391, May.
    8. Joe P. Mattey & Steven Strongin, 1997. "Factor utilization and margins for adjusting output: evidence from manufacturing plants," Economic Review, Federal Reserve Bank of San Francisco, pages 3-17.
    9. Yuriy Gorodnichenko & Matthew Shapiro, 2011. "Using the Survey of Plant Capacity to Measure Capital Utilization," Working Papers 11-19, Center for Economic Studies, U.S. Census Bureau.
    10. Caballero, Ricardo J & Engel, Eduardo M R A & Haltiwanger, John, 1997. "Aggregate Employment Dynamics: Building from Microeconomic Evidence," American Economic Review, American Economic Association, vol. 87(1), pages 115-137, March.
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    Cited by:

    1. Gilbert Cette & Rémy Lecat & Ahmed Ould Ahmed Jiddou, 2016. "Margin rate and the cycle: the role of trade openness," Applied Economics, Taylor & Francis Journals, vol. 48(37), pages 3569-3575, August.
    2. Gilbert Cette & Sandra Nevoux & Loriane Py, 2022. "The impact of ICTs and digitalization on productivity and labor share: evidence from French firms," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 31(8), pages 669-692, November.
    3. Pauline Lesterquy & Edith Stojanovic & Laurent Baudry & Honorine Dekoninck & Fabrice Heurtebize & Sylvie Tarrieu & Julien Zory, 2022. "La durée d’utilisation des équipements dans l’industrie rebondit en 2021, mais la reprise reste contrainte par des difficultés d’approvisionnement – Résultats de l’enquête menée par la Banque de Franc," Bulletin de la Banque de France, Banque de France, issue 240.
    4. Alexandra Ye. Batyaeva, 2023. "Impact of Shortage and Excess of Labor and Capital on the Financial Situation of Industrial Enterprises in the Russian Federation (1993–2022) [Влияние Недостатка И Избытка Труда И Капитала На Финан," Russian Economic Development, Gaidar Institute for Economic Policy, issue 8, pages 22-36, August.
    5. Sandra NEVOUX & Loriane PY & Laurent BAUDRY & Souny HARTWEG & Agnès MINIER & Sylvie TARRIEU, 2019. "Productive capital operating times continued to increase in 2018 - Findings of the annual Banque de France survey [La durée d’utilisation des équipements continue de progresser en 2018. Résultats d," Bulletin de la Banque de France, Banque de France, issue 222.
    6. Alexandra Ye. Batyaeva, 2023. "Влияние Недостатка И Избытка Труда И Капитала На Финансовое Положение Промышленных Предприятий В Рф (1993–2022 Гг.)," Russian Economic Development (in Russian), Gaidar Institute for Economic Policy, issue 8, pages 22-36, August.
    7. Valérie Chouard & Laurent Baudry & Agnès Minier & Roxanne Tabouret & Sylvie Tarrieu, 2018. "Productive capital operating times increased sharply in 2017 – findings of the Banque de France survey [La durée d’utilisation des équipements progresse fortement en 2017 – Résultats de l’enquête m," Bulletin de la Banque de France, Banque de France, issue 216.
    8. Chouard, V. & Minier, A. & Tarrieu, S. & Baudry, L. & Soual, A., 2015. "La progression modérée de la durée d’utilisation des équipements se poursuit en 2014 - Résultats de l’enquête menée par la Banque de France," Bulletin de la Banque de France, Banque de France, issue 199, pages 43-52.
    9. Paul Bouche & Gilbert Cette & Rémy Lecat, 2021. "News from the Frontier: Increased Productivity Dispersion across Firms and Factor Reallocation," Review of Economics and Institutions, Università di Perugia, vol. 12(2).
    10. Gerardin Mathilde, & Lesterquy Pauline, & Baudry Laurent, & Tarrieu Sylvie, & Dekoninck Honorine, & Heurtebize Fabrice, & Zory Julien, 2021. "Capital operating times plummeted in 2020 amid the unprecedented use of teleworking. Results of the survey conducted by the Banque de France in September 2020 [La durée d’utilisation des équipement," Bulletin de la Banque de France, Banque de France, issue 235.

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    More about this item

    Keywords

    factor utilization; production function; rigidities;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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