Investment and firm dynamics

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Investment and firm dynamics

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D'Erasmo, Pablo

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Pablo N. D'Erasmo

Abstract

In this paper I ask whether a model of ¯rm capital accumulation with entry and exit calibrated to match the investment regularities of U.S. establishments is capable of generating the dependence of ¯rm dynamics on size and age. Firms face uncertainty in the form of idiosyncratic productivity shocks and are subject to non-convex capital adjustment costs. I solve for the stationary equilibrium to show that the model can account for the simultaneous dependence of industry dynamics on size (once we condition on age) and on age (once we condition on size).

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 3598.

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Date of creation: 01 Mar 2006
Date of revision: 12 Jul 2007
Handle: RePEc:pra:mprapa:3598

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Find related papers by JEL classification:
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
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-2007-06-23 (All new papers)
NEP-BEC-2007-06-23 (Business Economics)
NEP-DGE-2007-06-23 (Dynamic General Equilibrium)
NEP-ENT-2007-06-23 (Entrepreneurship)
NEP-MAC-2007-06-23 (Macroeconomics)
NEP-TID-2007-06-23 (Technology & Industrial Dynamics)

References listed on IDEAS
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