Regional Infrastructure and Firm Investment. Theory and Empirical Evidence for Italy
AbstractWe model the channels through which public expenditure on infrastructure influences firm value and shapes its investment decisions via both adjustment costs and marginal profitability of capital. We test these hypotheses by using a large panel of Italian firms. Empirical results show that infrastructure interacts with revenues and costs in shaping firm's profitability of capital and influences its adjustment costs. Finally we find that infrastructure expenditure contributes to reduce the economic gap between the North and the South of Italy. These effects vary across regions and sectors.
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Bibliographic InfoPaper provided by Queen Mary, University of London, School of Economics and Finance in its series Working Papers with number 639.
Date of creation: Mar 2009
Date of revision:
Regional infrastructure; Firm's value; Corporate investment;
Other versions of this item:
- Francesco Aiello & Alfonsina Iona & Leone Leonida, 2012. "Regional infrastructure and firm investment: theory and empirical evidence for Italy," Empirical Economics, Springer, vol. 42(3), pages 835-862, June.
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- D92 - Microeconomics - - Intertemporal Choice - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-03-14 (All new papers)
- NEP-GEO-2009-03-14 (Economic Geography)
- NEP-URE-2009-03-14 (Urban & Real Estate Economics)
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