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A Vintage Model of Labour Demand by U.K. Manufacturing

Published online by Cambridge University Press:  17 August 2016

J. Ansar ,
A. Ingham ,
M. Toker  and
A. Ulph
J. Ansar
Affiliation:
University of Southampton and City University, London
A. Ingham
Affiliation:
University of Southampton and City University, London
M. Toker
Affiliation:
University of Southampton and City University, London
A. Ulph
Affiliation:
University of Southampton and City University, London
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Extract

The conventional model of factor demand has firms choosing the technique of production and mix of factor inputs to minimise the cost of producing some given level of output for an exogenously determined set of factor prices and a given set of technical knowhow. In this simple model, firms are free to vary the mix of factors each period. Unemployment then occurs as a feature of labour market failure. For otherwise wage rates would adjust so that supply equalled demand. A vintage model takes account of the fact that some factors are durable, and this means that it is important to take account of two different decisions on factor choice. Firms will make an ex-ante choice of techniques at the time that new capital is installed — e.g. will firms use automated energy intensive or labour intensive production methods? Once that piece of capital is installed, firms may be able subsequently to alter the mix of factors, but their ability to do so is now constrained by the ex-ante choice of technique. This second decision is the ex-post decision.

Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 53 , Issue 1 , March 1987 , pp. 3 - 26
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1987 

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References

REFERENCES

Ansar, J., Ingham, A., Leon, H., Toker, M. and Ulph, A. (1986), Demand for Energy and Capacity Utilisation in a Vintage Model of U.K. Manufacturing in Working below Capacity D.Bosworth and D.Heathfield (eds.), Macmillan, London.Google Scholar
Ansar, J., Ingham, A., Leon, H., Toker, M. and Ulph, A. (1986), A Vintage Model of the Demand for Energy in the U.K. Manufacturing Sector, Final Report on U.K. Dept. of Energy Project (unpublished).Google Scholar
Fuss, M. (1977), The Structure of Technology over Time, Econometrica, Vol. 45, n° 8.Google Scholar
Muellbauer, J. (1984), Aggregate Production Functions and Productivity Measurement: A New Look, CEPR Discussion Paper, n° 34.Google Scholar
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