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Capital Heterogenity: Does it Matter? Fundamental Q and Investment on a Panel of Italian Firms

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Author Info

  • Elena Bontempi

    ()
    (Universita` di Bologna)

  • Alessandra Del Boca

    ()
    (Universita` di Brescia)

  • Alessandra Franzosi

    ()
    (Borsa Italiana SpA)

  • Marzio Galeotti

    ()
    (Universita` di Milano)

  • Paola Rota

    ()
    (Universita` di Brescia)

Abstract

We study the determinants of firms' investment decisions with heterogeneous-capital goods. We exploit a panel of small and medium-sized firms, which allows us to distinguish between purchases and sales of capital goods. We consider separately equipment and structures and test the hypothesis of convex adjustment costs. We extend the fundamental Q approach to the case of two capital inputs. The results show that the standard convex costs model performs well for equipment but not for structures. We find evidence of nonconvex adjustment costs in the case of structures.

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Bibliographic Info

Article provided by The RAND Corporation in its journal RAND Journal of Economics.

Volume (Year): 35 (2004)
Issue (Month): 4 (Winter)
Pages: 674-690

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Handle: RePEc:rje:randje:v:35:y:2004:4:p:674-690

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Cited by:
  1. Charles Himmelberg & Alessandra del Boca & Marzio Galeotti & Paola Rota, 2005. "Investment and Time to Plan: A Comparison of Structures vs. Equipment in a Panel of Italian Firms," Working Papers 2005.54, Fondazione Eni Enrico Mattei.
  2. Alessandra Del Boca & Marzio Galeotti & Paola Rota, 2002. "Non-convexities in the adjustment of different capital inputs: a firm-level investigation," Working Papers 0203, University of Bergamo, Department of Economics.
  3. Bianco, Madga & Golinelli, Roberto & Parigi, Giuseppe, 2009. "Family firms and investments," MPRA Paper 19247, University Library of Munich, Germany.
  4. Bontempi, Maria Elena & Golinelli, Roberto & Parigi, Giuseppe, 2010. "Why demand uncertainty curbs investment: Evidence from a panel of Italian manufacturing firms," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 218-238, March.
  5. Magda Bianco & Maria Bontempi & Roberto Golinelli & Giuseppe Parigi, 2013. "Family firms’ investments, uncertainty and opacity," Small Business Economics, Springer, vol. 40(4), pages 1035-1058, May.
  6. Gema Pastor-Agustin & Manuel Espitia-Escuer & Marisa Ramirez-Aleson, 2007. "A Q Model Investment System in Material and Immaterial Assets," European Research Studies Journal, European Research Studies Journal, vol. 0(1-2), pages 43-64.

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