How do firms adjust production factors to the cycle?

Gilbert Cette (1, 2) , Rémy Lecat (1) , Ahmed Ould Ahmed Jiddou (1, 3)

1 Centre de recherche de la Banque de France
2 AMSE - Aix-Marseille Sciences Economiques
3 ENSAE - Ecole Nationale de la Statistique et de l'Analyse Economique

This paper studies the adjustment of production factors to the cycle taking into account factor utilization in multiple dimensions (labor working time, capital operating time and capital capacity utilization) and examines the impact of obstacles to increasing capital operating time on this adjustment path. Factor utilization adjusts the most rapidly, first through capital capacity utilization and capital operating time and then labor working time. The adjustment is slow for the number of employees and even slower for the capital stock. Obstacles to increasing capital operating time lead to a slower adjustment of capital operating time, offset by a stronger adjustment of capacity utilization.

Mots clés: factor utilization; production function; rigidities

Domaines: Economies et finances

Gilbert Cette, Rémy Lecat, Ahmed Ould Ahmed Jiddou. How do firms adjust production factors to the cycle?. The B.E. Journal of Macroeconomics, 2016, 16 (2), ⟨10.1515/bejm-2014-0099⟩. ⟨hal-03566891⟩