In this paper, a system of static and dynamic factor demand equations
based on a variant of the generalized Box-Cox cost function nesting
the translog, the generalized Leontief and the normalized quadratic functional
form is derived and estimated. OCM capital and general capital are
treated as quasi-fixed factors. Using panel data on 35 German industries,
we find that OCM capital is complementary to all skill levels. In nonmanufacturing
industries, we find that an increase in general capital tends
to reduce unskilled workers. Wage effects and substitution effects between
different types of labor and material inputs play a minor role in explaining
employment changes of highly skilled workers and medium-skilled workers
but these effects are more important in explaining the demand for unskilled
workers. |
