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Oxford Economic Papers Advance Access originally published online on August 14, 2008
Oxford Economic Papers 2009 61(1):104-127; doi:10.1093/oep/gpn026
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© Oxford University Press 2008 All rights reserved

Lumpy investments, factor adjustments, and labour productivity

Øivind A. Nilsen*, Arvid Raknerud{dagger}, Marina Rybalka{dagger}, and Terje Skjerpen{dagger}

*Norwegian School of Economics and Business Administration, and IZA; Norwegian School of Economics and Business Administration, Hellevn. 30, N-5045 Bergen, Norway; e-mail: oivind.nilsen{at}nhh.no
{dagger}Statistics Norway

JEL classifications: C13, C33, D21, D24


  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.


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