Detecting Propagation Effects by Observing Aggregate Distributions: The Case of Lumpy Investments
AbstractBy using an extensive panel data set of Italian firms, we show empirically that the fraction of firms that engage in a lumpy investment follows a non-normal, double-exponential distribution across region-year. We propose a simple sectoral model that generates the double-exponential distribution that arises from the complementarity of the firms' lumpy investments within a region. We calibrate the degree of complementarity by estimating an individual firm's behavior with the firm-level data. Simulations show that the degree of complementarity estimated at the firm level is consistent with the double-exponential fluctuations observed at the aggregate level.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. 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.
Bibliographic InfoPaper provided by European University Institute in its series Economics Working Papers with number ECO2011/25.
Date of creation: 2011
Date of revision:
Contact details of provider:
Postal: Badia Fiesolana, Via dei Roccettini, 9, 50016 San Domenico di Fiesole (FI) Italy
Web page: http://www.eui.eu/ECO/
More information through EDIRC
Interaction models; strategic complementarity; propagation effect; non-Gaussian uctuations; double-exponential distribution;
Other versions of this item:
- Luigi Guiso & Chaoqun Lai & Makoto Mirei, 2011. "Detecting Propagation Effects by Observing Aggregate Distributions: The Case of Lumpy Investments," EIEF Working Papers Series 1112, Einaudi Institute for Economics and Finance (EIEF), revised Jun 2011.
- L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
- 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:
- NEP-ALL-2012-03-21 (All new papers)
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.:
- Federico Cingano & Fabiano Schivardi, 2004.
"Identifying the Sources of Local Productivity Growth,"
Journal of the European Economic Association,
MIT Press, vol. 2(4), pages 720-742, 06.
- Federico Cingano & Fabiano Schivardi, 2003. "Identifying the Sources of Local Productivity Growth," Temi di discussione (Economic working papers) 474, Bank of Italy, Economic Research and International Relations Area.
- Ruediger Bachmann & Ricardo J. Caballero & Eduardo M.R.A. Engel, 2006.
"Aggregate Implications of Lumpy Investment: New Evidence and a DSGE Model,"
NBER Working Papers
12336, National Bureau of Economic Research, Inc.
- R?diger Bachmann & Ricardo J. Caballero & Eduardo M. R. A. Engel, 2013. "Aggregate Implications of Lumpy Investment: New Evidence and a DSGE Model," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(4), pages 29-67, October.
- Ruediger Bachmann & Ricardo J. Caballero & Eduardo Engel, 2008. "Aggregate Implications of Lumpy Investment: New Evidence and a DSGE Model," Cowles Foundation Discussion Papers 1566R, Cowles Foundation for Research in Economics, Yale University, revised Apr 2010.
- E. Glaeser & B. Sacerdote & Jose A. Scheinkman, 2003.
"The Social Multiplier,"
Levine's Working Paper Archive
506439000000000130, David K. Levine.
- Edward L. Glaeser & Bruce I. Sacerdote & Jose A. Scheinkman, 2002. "The Social Multiplier," Harvard Institute of Economic Research Working Papers 1968, Harvard - Institute of Economic Research.
- Edward L. Glaeser & Bruce I. Sacerdote & Jose A. Scheinkman, 2002. "The Social Multiplier," NBER Working Papers 9153, National Bureau of Economic Research, Inc.
- Andrew C. Caplin & Daniel F. Spulber, 1987.
"Menu Costs and the Neutrality of Money,"
NBER Working Papers
2311, National Bureau of Economic Research, Inc.
- Nirei, Makoto, 2008. "Aggregate Fluctuations of Discrete Investments," IIR Working Paper 08-08, Institute of Innovation Research, Hitotsubashi University.
- Nirei, Makoto, 2006. "Threshold behavior and aggregate fluctuation," Journal of Economic Theory, Elsevier, vol. 127(1), pages 309-322, March.
- Ricardo J. Caballero & Eduardo M.R.A. Engel, 1991.
"Dynamic (S,s) Economies,"
NBER Working Papers
3734, National Bureau of Economic Research, Inc.
- Vives, Xavier, 1990.
"Nash equilibrium with strategic complementarities,"
Journal of Mathematical Economics,
Elsevier, vol. 19(3), pages 305-321.
- Brock,W.A. & Durlauf,S.N., 2000.
"Discrete choice with social interactions,"
7, Wisconsin Madison - Social Systems.
- Mark E. Doms & Timothy Dunne, 1998.
"Capital Adjustment Patterns in Manufacturing Plants,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 1(2), pages 409-429, April.
- Mark Doms & Timothy Dunne, 1994. "Capital Adjustment Patterns in Manufacturing Plants," Working Papers 94-11, Center for Economic Studies, U.S. Census Bureau.
- Gourio, Francois & Kashyap, Anil K, 2007.
"Investment spikes: New facts and a general equilibrium exploration,"
Journal of Monetary Economics,
Elsevier, vol. 54(Supplemen), pages 1-22, September.
- Francois Gourio & Anil K Kashyap, 2007. "Investment Spikes: New Facts And A General Equilibrium Exploration," Boston University - Department of Economics - Working Papers Series WP2007-006, Boston University - Department of Economics.
- Francois Gourio & Anil K Kashyap, 2007. "Investment Spikes: New Facts and a General Equilibrium Exploration," NBER Working Papers 13157, National Bureau of Economic Research, Inc.
- Anil Kashyap & Francois Gourio, 2007. "Investment Spikes: New Facts and a General Equilibrium Exploration," 2007 Meeting Papers 148, Society for Economic Dynamics.
- Julia K. Thomas, 2002.
"Is lumpy investment relevant for the business cycle?,"
302, Federal Reserve Bank of Minneapolis.
- Julia K. Thomas, 2002. "Is Lumpy Investment Relevant for the Business Cycle?," Journal of Political Economy, University of Chicago Press, vol. 110(3), pages 508-534, June.
- Julia K. Thomas, . "Is Lumpy Investment Relevant for the Business Cycle?," GSIA Working Papers 1998-E250, Carnegie Mellon University, Tepper School of Business.
- Jovanovic, Boyan, 1986.
"Micro Shocks and Aggregate Risks,"
86-14, C.V. Starr Center for Applied Economics, New York University.
- Xavier Gabaix, 2009.
"The Granular Origins of Aggregate Fluctuations,"
NBER Working Papers
15286, National Bureau of Economic Research, Inc.
- Vasco M Carvalho, 2008.
"Aggregate Fluctuations and the Network Structure of Intersectoral Trade,"
2008 Meeting Papers
1062, Society for Economic Dynamics.
- Vasco Carvalho, 2007. "Aggregate fluctuations and the network structure of intersectoral trade," Economics Working Papers 1206, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2010.
- Shea, John S, 2002. "Complementarities and Comovements," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(2), pages 412-33, May.
- Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 797-817, August.
- Vuong, Quang H, 1989. "Likelihood Ratio Tests for Model Selection and Non-nested Hypotheses," Econometrica, Econometric Society, vol. 57(2), pages 307-33, March.
- Luigi Guiso & Fabiano Schivardi, 2007. "Spillovers in Industrial Districts," Economic Journal, Royal Economic Society, vol. 117(516), pages 68-93, 01.
- Dupor, Bill, 1999. "Aggregation and irrelevance in multi-sector models," Journal of Monetary Economics, Elsevier, vol. 43(2), pages 391-409, April.
- Long, John B, Jr & Plosser, Charles I, 1983. "Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 39-69, February.
- Cooper, Russell, 1994. "Equilibrium Selection in Imperfectly Competitive Economies with Multiple Equilibria," Economic Journal, Royal Economic Society, vol. 104(426), pages 1106-22, September.
- D'Elia, Enrico & Nascia, Leopoldo & Zeli, Alessandro, 2011.
"Analisi dei modelli d’impresa: discontinuità e sviluppo
[Analysing firm's evolution: discontinuity and growth]," MPRA Paper 35926, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marcia Gastaldo).
If references are entirely missing, you can add them using this form.