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Do financial factors affect the Capital-Labour ratio? Evidence from UK firm-level data

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posted on 2009-05-13, 10:38 authored by Marina-Eliza Spaliara
This paper investigates the nexus between financial factors and the capital-labour ratio using a rich firm-level data set. It is common in the literature to examine the impact of financial constraints on hiring and firing decisions separately from their impact on decisions related to investment in physical capital. We argue that as long as firms use both inputs in production and there is some substitutability between them, the two decisions need to be jointly analyzed. When we differentiate across firms that are more or less financially constrained, we find that the former group exhibits higher sensitivities of the capital-labour ratio to firm-specific characteristics, compared to the latter.

History

School

  • Business and Economics

Department

  • Economics

Publisher

© Loughborough University

Version

  • VoR (Version of Record)

Publication date

2008

Notes

This working paper is also available at: http://ideas.repec.org/p/lbo/lbowps/2008-02.html

ISSN

1750-4171

Book series

Loughborough University. Department of Economics. Discussion Paper Series;WP 2008-02

Language

  • en

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