| Sumario: | The purpose of this paper is to integrate empirical investment and employment functions and to link these with capacity considerations, that is, hours of work per man and utilization of capital equipment. Existing time-series employment models assume fixed capital stock, yet estimated labor stock adjustments are so long as to place this assumption in serious doubt. On the other hand, most investment models treat labor as a completely variable factor, though the employment models would appear to indicate otherwise. Furthermore, few of these models make adequate allowance for variations in utilization rates of labor and capital, and this sometimes makes parameter estimates difficult to interpret. Theoretical considerations suggest mutually interdependent time-series demand functions for labor and capital. This article specifies and estimate a dynamic model for all input demand functions, which allows interactions among these variables over time. The model presents a unified frame- work for interpreting and estimating in- put stock demand functions, the role of utilization rates in these functions and variations in utilization rates themselves. Section I discusses the problem. The model is specified in Section II, and estimates are presented in Section III. These results are compared with some alternative models in Section IV and conclusions are contained in Section V.
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