A Micro Econometric Model of Capital Utilization and Retirement, Issue 3568
The paper presents a micro econometric model of capital utilization and retirement. Some estimates of a firm's discrete decision problem with regard to an existing piece of capital--whether to operate, hold idle or retire it--are obtained, in the context of the US cement industry, by solving a discrete choice stochastic dynamic programming model. The estimates are then used to simulate effects of product and input price changes, and changes in the size and age of capital on a firm's propensity to operate, hold idle and retire capital.
What people are saying - Write a review
We haven't found any reviews in the usual places.
ATCQ average variable cost AVFIQ AVLI backward induction capital retirement capital utilization cement industry cement kiln cement plants cement price cement technology choice probabilities closed form corner solutions decision problem decision rules discrete choice dynamic programming model electricity price firm firm's fixed costs fuel and electricity fuel price Hence hold idle idle and retiring idle or retire impact implies input decay input prices instantaneous profit function kiln age kiln operation Labor likelihood function macro material and maintenance maximum likelihood MICRO ECONOMETRIC MODEL micro level MODEL OF CAPITAL NBER order Markov process output and input paper plant level positive scale predicted probabilities of operating profit maximizing proportion of kilns retirement choice Rust sample period scrap value significant solving the dynamic standard errors statistic stochastic dynamic programming Table true variance utilization and retirement utilization rate value function variable cost function variable inputs wage rate youngest kiln zero