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Non-convexities in the adjustment of different capital inputs: a firm-level investigation

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Author Info
Alessandra Del Boca () (Department of Economics, University of Brescia)
Marzio Galeotti (Department of Economics, University of Bergamo)
Paola Rota (Department of Economics, University of Brescia)

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Abstract

Recent developments in investment research have highlighted the importance of non-convexities and irreversibilities in the firms’ adjustment of quasi-fixed inputs. However, aggregation across capital goods may smooth out the discontinuities associated with the adjustment of individual assets. The lack of suitable data, is one of the reasons why empirical work has stronlgy relied on the assumption of capital homogeneity. In this paper we exploit a new data set of 1539 Italian firms which allows us to disaggregate across several capital types and consider separately purchases and sales of assets. We start from the basic disaggregation between equipment and structures and construct measures of fundamental Q to capture investment opportunities associated with each asset. To uncover the pattern of dynamic adjustment we use non-parametric techniques to relate each individual investment to own fundamental Q.

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File URL: http://www.unibg.it/dati/bacheca/653/7151.pdf
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Paper provided by University of Bergamo, Department of Economics in its series Working Papers with number 0203.

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Length: 44 pages
Date of creation: Jun 2002
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Handle: RePEc:brg:wpaper:0203

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Related research
Keywords: Investment; Heterogenous Capital; Non-convexities; Fundamental Q; Panel Data.;

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References listed on IDEAS
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Cited by:
(explanations, 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. Konstantinos Drakos, 2006. "A note on uncertainty and investment across the spectrum of irreversibility," Applied Economics Letters, Taylor and Francis Journals, vol. 13(13), pages 873-876, October. [Downloadable!] (restricted)
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