IDEAS home Printed from https://ideas.repec.org/a/tpr/restat/v74y1992i3p422-29.html
   My bibliography  Save this article

Costs of Adjustment, the Aggregation Problem and Investment

Author

Listed:
  • Gordon, Stephen

Abstract

This paper looks at the empirical consequences of inappropriately using a representative firm to mimic the aggregate investment decisions of a group of heterogeneous firms faced with costs of adjusting capital inputs. Improper aggregation generates a bias with two important consequences: (1) an apparent insensitivity of the aggregate capital stock to the user cost of capital and (2) predicted responses of the capital stock to shocks that are considerably slower than observed. Both of these consequences are features of available investment equations. Copyright 1992 by MIT Press.

Suggested Citation

  • Gordon, Stephen, 1992. "Costs of Adjustment, the Aggregation Problem and Investment," The Review of Economics and Statistics, MIT Press, vol. 74(3), pages 422-429, August.
    • Handle: RePEc:tpr:restat:v:74:y:1992:i:3:p:422-29
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0034-6535%28199208%2974%3A3%3C422%3ACOATAP%3E2.0.CO%3B2-B&origin=bc
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Charlotta Groth & Hashmat Khan, 2010. "Investment Adjustment Costs: An Empirical Assessment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(8), pages 1469-1494, December.
    2. Lubomir Lizal, 1999. "Does a Soft Macroeconomic Environment Induce Restructuring on the Microeconomic Level during the Transition Period? Evidence from Investment Behavior of Czech Enterprises," William Davidson Institute Working Papers Series 235, William Davidson Institute at the University of Michigan.
    3. Yuriy Gorodnichenko, 2007. "Using Firm Optimization to Evaluate and Estimate Returns to Scale," NBER Working Papers 13666, National Bureau of Economic Research, Inc.
    4. Gordon, Stephen, 1996. "How long is the firm's forecast horizon?," Journal of Economic Dynamics and Control, Elsevier, vol. 20(6-7), pages 1145-1176.
    5. George Bitros, 2008. "Why the structure of capital and the useful lives of its components matter: A test based on a model of Austrian descent," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 21(4), pages 301-328, December.
    6. Kjersti-Gro Lindquist & Terje Skjerpen, 2000. "Explaining the change in skill structure of labour demand in Norwegian manufacturing," Discussion Papers 293, Statistics Norway, Research Department.
    7. Montgomery, Michael R., 1995. "'Time-to-build' completion patterns for nonresidential structures, 1961-1991," Economics Letters, Elsevier, vol. 48(2), pages 155-163, May.
    8. Varshavsky, Leonid, 2010. "Methodological basis of modeling evolution of markets of products with long life cycle: a study of the civil aircrafts’ market," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 20(4), pages 53-74.
    9. Casalin, Fabrizio & Dia, Enzo, 2014. "Adjustment costs, financial frictions and aggregate investment," Journal of Economics and Business, Elsevier, vol. 75(C), pages 60-79.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tpr:restat:v:74:y:1992:i:3:p:422-29. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kelly McDougall (email available below). General contact details of provider: https://direct.mit.edu/journals .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.