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Lumpy investments, factor adjustments, and labour productivity

Author

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  • Øivind A. Nilsen
  • Arvid Raknerud
  • Marina Rybalka
  • Terje Skjerpen

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, man hours, labour productivity, and 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. The changes in labour 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. Focusing on sectoral differences, capital adjustments are found to be smoother in the service industry than in the two manufacturing industries which may be related to differences in labour intensities between the industries. Copyright 2009 , Oxford University Press.

Suggested Citation

  • Øivind A. Nilsen & Arvid Raknerud & Marina Rybalka & Terje Skjerpen, 2009. "Lumpy investments, factor adjustments, and labour productivity," Oxford Economic Papers, Oxford University Press, vol. 61(1), pages 104-127, January.
    • Handle: RePEc:oup:oxecpp:v:61:y:2009:i:1:p:104-127
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    Cited by:

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    2. Vanja Grozdić & Branislav Marić & Mladen Radišić & Jarmila Šebestová & Marcin Lis, 2020. "Capital Investments and Manufacturing Firms’ Performance: Panel-Data Analysis," Sustainability, MDPI, vol. 12(4), pages 1-18, February.
    3. Marco Grazzi & Nadia Jacoby & Tania Treibich, 2013. "Dynamics of Investment and Firm Performance: Comparative Evidence from Manufacturing Industries," GREDEG Working Papers 2013-09, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    4. Michał Gradzewicz, 2021. "What Happens After an Investment Spike—Investment Events and Firm Performance," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 39(3), pages 636-651, July.
    5. Amundsen, Alexander, 2023. "Interaction effects in the adjustment cost function of firms," Journal of Economic Dynamics and Control, Elsevier, vol. 146(C).
    6. Domini, Giacomo & Grazzi, Marco & Moschella, Daniele & Treibich, Tania, 2022. "For whom the bell tolls: The firm-level effects of automation on wage and gender inequality," Research Policy, Elsevier, vol. 51(7).
    7. Magne K. Asphjell & Wilko Letterie & Øivind A. Nilsen & Gerard A. Pfann, 2014. "Sequentiality Versus Simultaneity: Interrelated Factor Demand," The Review of Economics and Statistics, MIT Press, vol. 96(5), pages 986-998, December.
    8. Øivind A. Nilsen & Arvid Raknerud & Marina Rybalka & Terje Skjerpen, 2011. "The Importance Of Skill Measurement For Growth Accounting," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 57(2), pages 293-305, June.
    9. Schulte, Reinhard, 2018. "New venture investing trajectories: A large scale longitudinal study," Lüneburger Beiträge zur Gründungsforschung 13, Leuphana University of Lüneburg, Department of Entrepreneurship & Start-up Management.
    10. Kapelko, Magdalena & Oude Lansink, Alfons & Stefanou, Spiro E., 2015. "Analyzing the impact of investment spikes on dynamic productivity growth," Omega, Elsevier, vol. 54(C), pages 116-124.
    11. Enrico D'Elia & Alessandra Righi, 2017. "Firm's level labour intensity in Italy after the Great Recession," Working Papers 1, Department of the Treasury, Ministry of the Economy and of Finance.
    12. Addison, John T. & Portugal, Pedro & Varejão, José, 2014. "Labor demand research: Toward a better match between better theory and better data," Labour Economics, Elsevier, vol. 30(C), pages 4-11.
    13. Xiaodan Yu & Giovanni Dosi & Marco Grazzi & Jiasu Lei, 2015. "Inside the Virtuous Cycle between Productivity, Profitability, Investment and Corporate Growth: An Anatomy of China Industrialization," LEM Papers Series 2015/03, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    14. Martin Falk & Sigbjorn Landazuri Tveteraas, 2020. "Modelling the wider effects of ski lift investments," Empirical Economics, Springer, vol. 59(1), pages 259-274, July.
    15. Yu, Xiaodan & Dosi, Giovanni & Grazzi, Marco & Lei, Jiasu, 2017. "Inside the virtuous circle between productivity, profitability, investment and corporate growth: An anatomy of Chinese industrialization," Research Policy, Elsevier, vol. 46(5), pages 1020-1038.
    16. Michał Gradzewicz, 2018. "What happens when firms invest? Investment events and firm performance," NBP Working Papers 291, Narodowy Bank Polski.
    17. Temesgen Woldamanuel Wajebo, 2024. "Determinants of Labour Demand in Manufacturing Sector in Ethiopia," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 67(3), pages 751-782, September.

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