The Mix and Scale of Factors with Irreversibility and Fixed Costs of Investment / Andrew B. Abel, Janice C. Eberly.

Author
Abel, Andrew B. [Browse]
Format
Book
Language
English
Published/​Created
Cambridge, Mass. National Bureau of Economic Research 1997.
Description
1 online resource: illustrations (black and white);

Details

Related name
Series
  • Working Paper Series (National Bureau of Economic Research) no. w6148. [More in this series]
  • NBER working paper series no. w6148
Summary note
When factors of production can be adjusted costlessly, the mix of factors can be considered separately from their scale. We examine factor choice and utilization when investment is irreversible and subject to a fixed cost, so that the capital stock is a quasi-fixed factor that is adjusted infrequently and by discrete amounts. We derive and analyze analytic approximations for optimal investment behavior, and show how the quasi-fixity of capital eliminates the dichotomy between factor mix and scale. We show that the quasi-fixity of capital can give rise to labor hoarding, even when labor is a purely flexible factor.
Notes
August 1997.
Source of description
Print version record
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