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The Impact of Uncertainty on Investment: A Meta-Analysis

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  • Mark J. Koetse

    ()
    (Vrije Universiteit Amsterdam)

  • Henri L.F. de Groot

    ()
    (Vrije Universiteit Amsterdam)

  • Raymond J.G.M. Florax

    ()
    (Purdue University, and Vrije Universiteit)

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.

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Bibliographic Info

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

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Date of creation: 10 Jul 2006
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Handle: RePEc:dgr:uvatin:20060060

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Keywords: investment; uncertainty; meta-analysis;

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Cited by:
  1. Akcomak, Semih & ter Weel, Bas, 2006. "Social Capital, Innovation and Growth: Evidence from Europe," MERIT Working Papers 040, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  2. Mellati, Ali, 2008. "Uncertainty and investment in private sector: An analytical argument and a review of the economy of Iran," MPRA Paper 26655, University Library of Munich, Germany.
  3. 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.

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