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Capital Adjustment Patterns In Swedish Manufacturing Firms: What Model Do They Suggest?

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Author Info
Mikael Carlsson
Stefan Laséen

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Abstract

We study the capital adjustment process in Swedish manufacturing Firms and relate the findings to standard models of capital adjustment. We have three findings. ("i") The capital accumulation process is highly volatile and non-persistent. ("ii") An "S", "s" model fits the data well in some, but not all, dimensions. Also, a model with irreversible capital goes a long way in matching the data. In fact, we argue that it is much more likely that the data reflect irreversibility than fix adjustment costs. ("iii") The estimated adjustment function implies that aggregate investment is relatively unresponsive in deep recessions as compared to normal times. Copyright 2005 Royal Economic Society.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0297.2005.01027.x
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Publisher Info
Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 115 (2005)
Issue (Month): 506 (October)
Pages: 969-986
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Handle: RePEc:ecj:econjl:v:115:y:2005:i:506:p:969-986

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Bertola, Guiseppe & Caballero, Ricardo J, 1994. "Irreversibility and Aggregate Investment," Review of Economic Studies, Blackwell Publishing, vol. 61(2), pages 223-46, April. [Downloadable!] (restricted)
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  2. Caballero, Ricardo J, 1994. "Small Sample Bias and Adjustment Costs," The Review of Economics and Statistics, MIT Press, vol. 76(1), pages 52-58, February. [Downloadable!] (restricted)
  3. Mark E. Doms & Timothy Dunne, 1998. "Capital Adjustment Patterns in Manufacturing Plants," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(2), pages 409-429, April. [Downloadable!] (restricted)
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  4. Ricardo J. Caballero, 1997. "Aggregate Investment," NBER Working Papers 6264, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Daniel S. Hamermesh & Gerard A. Pfann, 1996. "Adjustment Costs in Factor Demand," Journal of Economic Literature, American Economic Association, vol. 34(3), pages 1264-1292, September. [Downloadable!] (restricted)
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  6. Øivind Anti Nilsen & Fabio Schiantarelli, 2003. "Zeros and Lumps in Investment: Empirical Evidence on Irreversibilities and Nonconvexities," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1021-1037, December. [Downloadable!] (restricted)
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  7. Ricardo J. Caballero & Eduardo M. R. A. Engel & John C. Haltiwanger, 1995. "Plant-Level Adjustment and Aggregate Investment Dynamics," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1995-2), pages 1-54. [Downloadable!]
  8. Prakash Loungani & Bharat Trehan, 1997. "Job creation and destruction," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue May 2. [Downloadable!]
  9. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932.
  10. Dufwenberg, Martin & Koskenkyla, Heikki & Sodersten, Jan, 1994. " Manufacturing Investment and Taxation in the Nordic Countries," Scandinavian Journal of Economics, Blackwell Publishing, vol. 96(3), pages 443-61.
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Cited by:
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  1. Alessandra Del Boca & Marzio Galeotti & Paola Rota, 2003. "Non-convexities in the Adjustment of Different Capital Inputs: A Firm-level Investigation," Working Papers 2003.35, Fondazione Eni Enrico Mattei. [Downloadable!]
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  2. Carlsson, Mikael, 2004. "Investment and Uncertainty: A Theory-Based Empirical Approach," Working Paper Series 2004:17, Uppsala University, Department of Economics. [Downloadable!]
    Other versions:
  3. Øivind A. Nilsen, Arvid Raknerud, Marina Rybalka and Terje Skjerpen, 2005. "Lumpy Investments, Factor Adjustments and Productivity," Discussion Papers 441, Research Department of Statistics Norway. [Downloadable!]
  4. Lundin, Magnus & Gottfries, Nils & Lindström, Tomas, 2004. "Price and Investment Dynamics: An Empirical Analysis of Plant Level Data," Working Paper Series 2004:7, Uppsala University, Department of Economics. [Downloadable!]
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