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The existence of factor substitution in the primary aluminium industry: A multivariate error-correction approach using Norwegian panel data

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Abstract

This paper presents an econometric analysis of factor demands in the Norwegian primary aluminium industry using annual plant-level panel data. The translog cost function approach is applied, and a multivariate error-correction model of the cost shares of labour, raw materials and electricity is estimated. Capital is assumed tobe quasi-fixed. The hypothesis of fixed input coefficients is rejected for this industry, but the estimated own-price and cross-price elasticities suggest that relative price variations have limited effect on conditional factor demands.

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Authors and Affiliations

  1. Statistics Norway, P.O.Box 8131 Dep., 0033, Oslo, Norway

    Kjersti-Gro Lindquist

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  1. Kjersti-Gro Lindquist
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Additional information

The author wishes to thank Ådne Cappelen, Tor Jakob Klette, Asbjørn Rødseth, Margaret Simpson, Terje Skjerpen, participants at the Econometric Society European Meeting 1994 and two anonymous referees for valuable comments. Financial support for this research was provided by Norges Forskningsråd (Nærings-LOS, project 2150101).

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Lindquist, KG. The existence of factor substitution in the primary aluminium industry: A multivariate error-correction approach using Norwegian panel data. Empirical Economics 20, 361–383 (1995). https://doi.org/10.1007/BF01180672

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  • DOI: https://doi.org/10.1007/BF01180672

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