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) a model with irreversible capital goes a very long way in capturing the salient features of firm-level capital adjustment behavior. To see this, an integrated approach is necessary since different alternative models do well in certain comparative dimensions but not in others. (ii) The partial adjustment model generally fails to explain capital adjustment patterns. (iii) The capital accumulation process is a highly volatile and non-persistent process on the firm-level. (iv) Firms adjustment behavior is asymmetric in that they are more likely to tolerate excess capital than shortages of capital, and finally, (v) the estimated adjustment function implies that aggregate investment is relatively unresponsive to aggregate shocks in deep recessions as compared to the responsiveness in normal times.
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Bibliographic InfoPaper provided by Uppsala University, Department of Economics in its series Working Paper Series with number 2001:15.
Length: 39 pages
Date of creation: 16 Aug 2001
Date of revision:
Publication status: Forthcoming in Economic Journal.
Contact details of provider:
Postal: Department of Economics, Uppsala University, P. O. Box 513, SE-751 20 Uppsala, Sweden
Phone: + 46 18 471 25 00
Fax: + 46 18 471 14 78
Web page: http://www.nek.uu.se/
More information through EDIRC
Investment; Irreversibilities; Lumpiness; Manufacturing;
Other versions of this item:
- Mikael Carlsson & Stefan LasÃ©en, 2005. "Capital Adjustment Patterns In Swedish Manufacturing Firms: What Model Do They Suggest?," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 115(506), pages 969-986, October.
- Carlsson, M. & Laseen, S., 2001. "Capital Adjustment Patterns in Swedish Manufacturing Firms: What Model do they Suggest?," Papers 2001-15, Uppsala - Working Paper Series.
- Carlsson, Mikael & LasÃ©en, Stefan, 2002. "Capital Adjustment Patterns in Swedish Manufacturing Firms: What Model Do They Suggest?," Working Paper Series 143, Sveriges Riksbank (Central Bank of Sweden).
- 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-2001-09-10 (All new papers)
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