Capital Adjustment Patterns in Swedish Manufacturing Firms: What Model Do They Suggest?
AbstractIn this paper we study the capital adjustment process in Swedish manufacturing firms and relate the empirical findings to standard models of firm behavior in the presence of impediments to capital adjustments. We find that (i) an S,s model fits the data well in some, but not all, dimensions. (ii) A model with irreversible capital goes a long way in capturing the salient features of firm-level capital adjustment behavior. (iii) The partial adjustment model generally fails to explain capital adjustment patterns. (iv) The capital accumulation process is a highly volatile and non-persistent process on the firm-level. (v) Firms’ adjustment behavior is asymmetric in that they are more likely to tolerate excess capital than shortages of capital, and, finally, (vi) the estimated adjustment function implies that aggregate investment is relatively unresponsive to aggregate shocks in deep recessions as compared to normal times.
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Bibliographic InfoPaper provided by Sveriges Riksbank (Central Bank of Sweden) in its series Working Paper Series with number 143.
Length: 43 pages
Date of creation: 01 Dec 2002
Date of revision:
Publication status: Published in Economic Journal, 2005, pages 969-986.
Investment; Irreversibilities; Lumpiness; Manufacturing;
Other versions of this item:
- Mikael Carlsson & Stefan Laséen, 2005. "Capital Adjustment Patterns In Swedish Manufacturing Firms: What Model Do They Suggest?," Economic Journal, Royal Economic Society, vol. 115(506), pages 969-986, October.
- Carlsson, Mikael & Laséen, Stefan, 2001. "Capital Adjustment Patterns in Swedish Manufacturing Firms: What Model do they Suggest?," Working Paper Series 2001:15, Uppsala University, Department of Economics.
- Carlsson, M. & Laseen, S., 2001. "Capital Adjustment Patterns in Swedish Manufacturing Firms: What Model do they Suggest?," Papers 2001-15, Uppsala - Working Paper Series.
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-01-12 (All new papers)
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