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Generalized Q Models for Investment

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  • Galeotti, Marzio
  • Schiantarelli, Fabio

Abstract

The authors extend the Q theory of investment to allow for adjustment costs for labor, under the additional assumption that the firm is a monopolistic competitor in the output market. The issue of nonconstant returns to scale is also discussed. The authors show that the standard Q model is a special case of a more general model involving testable parameter restrictions. Estimates for the U.S. manufacturing sector suggest that the departure from the assumption of perfect competition and lack of adjustment costs for labor receive empirical support in the data. Copyright 1991 by MIT Press.

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Bibliographic Info

Article provided by MIT Press in its journal Review of Economics & Statistics.

Volume (Year): 73 (1991)
Issue (Month): 3 (August)
Pages: 383-92

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Handle: RePEc:tpr:restat:v:73:y:1991:i:3:p:383-92

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Web page: http://mitpress.mit.edu/journals/

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Cited by:
  1. Lin, Xiaoji, 2012. "Endogenous technological progress and the cross-section of stock returns," Journal of Financial Economics, Elsevier, vol. 103(2), pages 411-427.
  2. Kazuo Ogawa & Kazuyuki Suzuki, 2007. "Information, Investment, and the Stock Market: A Study of Investment Revision Data of Japanese Manufacturing Industries," ISER Discussion Paper 0681, Institute of Social and Economic Research, Osaka University.
  3. Philip Tomlinson, 2002. "The Real Effects of Transnational Activity upon Investment and Labour Demand within Japan's Machinery Industries," International Review of Applied Economics, Taylor & Francis Journals, vol. 16(2), pages 107-129.
  4. Asphjell, Magne Krogstad & Letterie, Wilko & Nilsen, Øivind Anti & Pfann, Gerard A., 2010. "Sequentiality versus Simultaneity: Interrelated Factor Demand," IZA Discussion Papers 5359, Institute for the Study of Labor (IZA).
  5. Richard W. Kopcke & Richard S. Brauman, 2001. "The performance of traditional macroeconomic models of businesses' investment spending," New England Economic Review, Federal Reserve Bank of Boston, pages 3-39.

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