The Cross-Sectional Effect of Inflation on Corporate Investment and Employment

Publication Type

Journal Article

Publication Date

6-1993

Abstract

This paper examines the cross-sectional effect of inflation on the investment and employment decisions. The paper shows that more heavily capitalized firms tend to have a greater reduction in the capital-labor ratio during an inflationary period. The paper also shows that firms with a higher cost of debt to wage ratios and a larger amount of depreciation shelter tend to use more labor in the inflationary period. Empirical results are generally consistent with these arguments.

Keywords

Relative factor price, capital intensity, elasticity of substitution

Discipline

Business | Corporate Finance

Research Areas

Finance

Publication

Review of Quantitative Finance and Accounting

Volume

3

Issue

2

First Page

203

Last Page

220

ISSN

0924-865X

Identifier

10.1007/bf02407006

Publisher

Springer

Additional URL

https://doi.org/10.1007/bf02407006

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