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Profitability and factor demands under uncertainty

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Summary

The medium term relationship between wages and employment very much concerned Jan Tinbergen in the 30's and is concerning us again today. Precisely analyzing the demands for labor and capital is a prerequisite for understanding this relationship. With this purpose two propositions are here scrutinized: the productive capacity that a firm chooses mainly depends on its expectations about future demand and on the profitability of production; the desired capital intensity mainly depends on the relative cost of capital with respect to labor. In the model uncertainty of future prospects and irreversibility of investment play the major roles.

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Authors and Affiliations

  1. Collège de France, Paris

    Edmond Malinvaud

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  1. Edmond Malinvaud
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Additional information

Second Tinbergen Lecture, delivered on October 8, 1988, in The Hague for the Royal Netherlands Economic Association.

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Malinvaud, E. Profitability and factor demands under uncertainty. De Economist 137, 2–15 (1989). https://doi.org/10.1007/BF01857709

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  • DOI: https://doi.org/10.1007/BF01857709

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