This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

The Impact of Uncertainty on Investment: A Meta-Analysis

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Mark J. Koetse () (Vrije Universiteit Amsterdam)
Henri L.F. de Groot () (Vrije Universiteit Amsterdam)
Raymond J.G.M. Florax () (Purdue University, and Vrije Universiteit)

Additional information is available for the following registered author(s):

Abstract

In this paper we perform a meta-analysis on empirical estimates of the impact between investment and uncertainty. Since the outcomes of primary studies are largely incomparable with respect to the magnitude of the effect, our analysis focuses on the direction and statistical significance of the relationship. The standard approach in this situation is to estimate an ordered probit model on a categorical estimate, defined in terms of the direction of the effect. The estimates are transformed into marginal effects, in order to represent the changes in the probability of finding a negative significant, insignificant, and positive significant estimate. Although a meta-analysis generally does not allow for inferences on the correctness of model specifications in primary studies, our results give clear directions for model building in empirical investment research. For example, not including factor prices in investment models may seriously affect the model outco! mes. Furthermore, we find that Q-models produce more negative significant estimates than other models do, ceteris paribus. The outcome of a study is also affected by the type of data used in a primary study. Although it is clear that meta-analysis cannot always give decisive insights into the explanations for the variation in empirical outcomes, our meta-analysis shows that we can explain to a large extent why empirical estimates of the investment-uncertainty relationship differ.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.tinbergen.nl/discussionpapers/06060.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 06-060/3.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: 10 Jul 2006
Date of revision:
Handle: RePEc:dgr:uvatin:20060060

Contact details of provider:
Web page: http://www.tinbergen.nl/

For technical questions regarding this item, or to correct its listing, contact: (Walther Schoonenberg).

Related research
Keywords: investment; uncertainty; meta-analysis;

Other versions of this item:

Find related papers by JEL classification:
C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - General
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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. Serven, Luis, 1997. "Uncertainty, instability, and irreversible investment : theory, evidence, and lessons for Africa," Policy Research Working Paper Series 1722, The World Bank. [Downloadable!]
  2. Henley, Andrew & Carruth, Alan & Dickerson, Andy, 2003. "Industry-wide versus firm-specific uncertainty and investment: British company panel data evidence," Economics Letters, Elsevier, vol. 78(1), pages 87-92, January. [Downloadable!] (restricted)
  3. Aizenman, Joshua & Marion, Nancy, 1999. "Volatility and Investment: Interpreting Evidence from Developing Countries," Economica, London School of Economics and Political Science, vol. 66(262), pages 157-79, May. [Downloadable!] (restricted)
  4. Robert Lensink, 2002. "Is the uncertainty-investment link non-linear? Empirical evidence for developed economies," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 138(1), pages 131-147, March. [Downloadable!] (restricted)
  5. Gregory K. Bell & José M. Campa, 1997. "Irreversible Investments And Volatile Markets: A Study Of The Chemical Processing Industry," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 79-87, February. [Downloadable!] (restricted)
  6. Ogawa, K & Suzuki, K, 1997. "Uncertainty and Investment : Some Evidence from the Panel Data of Japanese Manufacturing Firms," Papers 436, Osaka - Institute of Social and Economic Research.
  7. Goldberg, Linda S, 1993. "Exchange Rates and Investment in United States Industry," The Review of Economics and Statistics, MIT Press, vol. 75(4), pages 575-88, November. [Downloadable!] (restricted)
  8. Abay Mulatu & Raymond J.G.M. Florax & Cees A.A.M. Withagen, 2001. "Environmental Regulation and Competitiveness," Tinbergen Institute Discussion Papers 01-039/3, Tinbergen Institute. [Downloadable!]
  9. Calcagnini, Giorgio & Saltari, Enrico, 2000. "Real and Financial Uncertainty and Investment Decisions," Journal of Macroeconomics, Elsevier, vol. 22(3), pages 491-514, July. [Downloadable!] (restricted)
  10. Ghosal, Vivek, 1995. "Input Choices under Price Uncertainty," Economic Inquiry, Oxford University Press, vol. 33(1), pages 142-58, January.
  11. Hurn, A S & Wright, Robert E, 1994. "Geology or Economics? Testing Models of Irreversible Investment Using North Sea Oil Data," Economic Journal, Royal Economic Society, vol. 104(423), pages 363-71, March. [Downloadable!] (restricted)
  12. Julia Darby & Andrew Hughes Hallett & Jonathan Ireland & Laura Piscitelli, . "The Impact of Exchange Rate Uncertainty on the Level of Investment," ICMM Discussion Papers 49, Department of Economics University of Strathclyde.
    Other versions:
  13. Marga PEETERS, 2001. "Does Demand and Price Uncertainty affect Belgian and Spanish Corporate Investment?," Discussion Papers (REL - Recherches Economiques de Louvain) 2001031, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
  14. Green, Christopher J. & Lensink, Robert & Murinde, Victor, 2001. "Demand uncertainty and the capital-labour ratio in Poland," Emerging Markets Review, Elsevier, vol. 2(2), pages 184-197, June. [Downloadable!] (restricted)
  15. Nakamura, Tamotsu, 1999. "Risk-aversion and the uncertainty-investment relationship: a note," Journal of Economic Behavior & Organization, Elsevier, vol. 38(3), pages 357-363, March. [Downloadable!] (restricted)
  16. Abel, Andrew B, 1983. "Optimal Investment under Uncertainty," American Economic Review, American Economic Association, vol. 73(1), pages 228-33, March.
  17. Pindyck, Robert S, 1993. "A Note on Competitive Investment under Uncertainty," American Economic Review, American Economic Association, vol. 83(1), pages 273-77, March. [Downloadable!] (restricted)
  18. Hartman, Richard, 1972. "The effects of price and cost uncertainty on investment," Journal of Economic Theory, Elsevier, vol. 5(2), pages 258-266, October. [Downloadable!] (restricted)
  19. Robert S. Pindyck & Andres Solimano, 1993. "Economic Instability and Aggregate Investment," NBER Working Papers 4380, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  20. Leahy, John V & Whited, Toni M, 1996. "The Effect of Uncertainty on Investment: Some Stylized Facts," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(1), pages 64-83, February. [Downloadable!] (restricted)
    Other versions:
  21. Favero, Carlo A & Pesaran, M Hashem & Sharma, Sunil, 1994. "A Duration Model of Irreversible Oil Investment: Theory and Empirical Evidence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 9(S), pages S95-112, Suppl. De. [Downloadable!] (restricted)
  22. Ferderer, J Peter, 1993. "The Impact of Uncertainty on Aggregate Investment Spending: An Empirical Analysis," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(1), pages 30-48, February. [Downloadable!] (restricted)
  23. Justin van der Sluis & Mirjam van Praag & Wim Vijverberg, 2005. "Entrepreneurship Selection and Performance: A Meta-Analysis of the Impact of Education in Developing Economies," World Bank Economic Review, Oxford University Press, vol. 19(2), pages 225-261.
  24. Carruth, Alan & Dickerson, Andrew & Henley, Andrew, 2000. " What Do We Know about Investment under Uncertainty?," Journal of Economic Surveys, Blackwell Publishing, vol. 14(2), pages 119-53, April. [Downloadable!] (restricted)
    Other versions:
  25. Bo, Hong, 2002. "Idiosyncratic Uncertainty and Firm Investment," Australian Economic Papers, Blackwell Publishing, vol. 41(1), pages 1-14, March. [Downloadable!] (restricted)
  26. Mark Koetse & Arno Vlist & Henri Groot, 2006. "The Impact of Perceived Expectations and Uncertainty on Firm Investment," Small Business Economics, Springer, vol. 26(4), pages 365-376, 05. [Downloadable!] (restricted)
  27. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March. [Downloadable!] (restricted)
  28. Goel, Rajeev K & Ram, Rati, 1999. "Variations in the Effect of Uncertainty on Different Types of Investment: An Empirical Investigation," Australian Economic Papers, Blackwell Publishing, vol. 38(4), pages 481-92, December. [Downloadable!] (restricted)
  29. Aizenman, Joshua & Marion, Nancy P. & Marion, Nancy P., 1993. "Macroeconomic uncertainty and private investment," Economics Letters, Elsevier, vol. 41(2), pages 207-210. [Downloadable!] (restricted)
  30. Lensink, Robert & Steen, Paul van & Sterken, Elmer, 2000. "Is size important for the investment-uncertainty relationship? : an empirical analyses for Dutch firms," Research Report 00E03, University of Groningen, Research Institute SOM (Systems, Organisations and Management). [Downloadable!]
  31. Aymo Brunetti & Beatrice Weder, 1998. "Investment and institutional uncertainty: A comparative study of different uncertainty measures," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 134(3), pages 513-533, September. [Downloadable!] (restricted)
  32. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February. [Downloadable!] (restricted)
  33. Ghosal, Vivek, 1991. "Demand Uncertainty and the Capital-Labor Ratio: Evidence from the U.S. Manufacturing Sector," The Review of Economics and Statistics, MIT Press, vol. 73(1), pages 157-61, February. [Downloadable!] (restricted)
  34. Caballero, Ricardo J, 1991. "On the Sign of the Investment-Uncertainty Relationship," American Economic Review, American Economic Association, vol. 81(1), pages 279-88, March. [Downloadable!] (restricted)
  35. Dorfman, Jeffrey H & Heien, Dale, 1989. "The Effects of Uncertainty and Adjustment Costs on Investment in the Almond Industry," The Review of Economics and Statistics, MIT Press, vol. 71(2), pages 263-74, May. [Downloadable!] (restricted)
  36. Pindyck, Robert S, 1982. "Adjustment Costs, Uncertainty, and the Behavior of the Firm," American Economic Review, American Economic Association, vol. 72(3), pages 415-27, June.
  37. Nakamura, Tamotsu, 2002. "Finite durability of capital and the investment-uncertainty relationship," Journal of Economic Behavior & Organization, Elsevier, vol. 48(1), pages 51-56, May. [Downloadable!] (restricted)
  38. Ghosal, Vivek & Loungani, Prakash, 1996. "Product Market Competition and the Impact of Price Uncertainty on Investment: Some Evidence from US Manufacturing Industries," Journal of Industrial Economics, Blackwell Publishing, vol. 44(2), pages 217-28, June. [Downloadable!] (restricted)
    Other versions:
  39. Serven, Luis & Solimano, Andres, 1993. "Debt crisis, adjustment policies and capital formation in developing countries: Where do we stand?," World Development, Elsevier, vol. 21(1), pages 127-140, January. [Downloadable!] (restricted)
  40. Luigi Guiso & Giuseppe Parigi, 1999. "Investment And Demand Uncertainty," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 185-227, February. [Downloadable!] (restricted)
    Other versions:
  41. Episcopos, Athanasios, 1995. "Evidence on the relationship between uncertainty and irreversible investment," The Quarterly Review of Economics and Finance, Elsevier, vol. 35(1), pages 41-52. [Downloadable!] (restricted)
  42. Pindyck, Robert S, 1988. "Irreversible Investment, Capacity Choice, and the Value of the Firm," American Economic Review, American Economic Association, vol. 78(5), pages 969-85, December. [Downloadable!] (restricted)
    Other versions:
  43. Driver, Ciaran & Moreton, David, 1991. "The Influence of Uncertainty on UK Manufacturing Investment," Economic Journal, Royal Economic Society, vol. 101(409), pages 1452-59, November. [Downloadable!] (restricted)
  44. Saltari, Enrico & Ticchi, Davide, 2005. "Risk-aversion and the investment-uncertainty relationship: a comment," Journal of Economic Behavior & Organization, Elsevier, vol. 56(1), pages 121-125, January. [Downloadable!] (restricted)
Full references

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. Henri L.F. de Groot & Jacques Poot & Martijn J. Smit, 2007. "Agglomeration, Innovation and Regional Development: Theoretical Perspectives and Meta-Analysis," Tinbergen Institute Discussion Papers 07-079/3, Tinbergen Institute. [Downloadable!]
Statistics
Access and download statistics

Did you know? You can create a compilation of all publications of a group of people, say alumni of a program, your students or memers of an association.

This page was last updated on 2009-11-26.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.