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Investment and firm dynamics

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  • D'Erasmo, Pablo

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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File URL: http://mpra.ub.uni-muenchen.de/3598/
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File URL: http://mpra.ub.uni-muenchen.de/4032/
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Bibliographic Info

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

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Date of creation: Mar 2006
Date of revision: Apr 2007
Handle: RePEc:pra:mprapa:3598

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Keywords: firm dynamics; investment; financial constraints;

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  18. Rui Albuquerque & Hugo Hopenhayn, 2002. "Optimal Lending Contracts and Firm Dynamics," RCER Working Papers 493, University of Rochester - Center for Economic Research (RCER).
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