Advanced Search
MyIDEAS: Login

Estimation of a dynamic structural model of irreversible investment

Contents:

Author Info

  • Rocio Sanchez
Registered author(s):

    Abstract

    In this paper we propose and estimate a dynamic structural model of fixed capital investment using firm-level Spanish data. We first characterize the optimal behavior of a firm facing uncertainty in demand and input prices, as well as kinked and lump-sum adjustment costs. This nonconvex adjustment cost structure is suggested by the observed evidence of inaction and lumpiness in microeconomic investment data. The optimal decision rule we derive is then used to specify a microeconometric discrete choice model. Our estimation method consists on a nested algorithm. The outer algorithm maximizes the likelihood function in each iteration in the search of the structural parameters. The inner algorithm computes the difference in conditional value functions from the nonparametric estimation of conditional choice probabilities. Thus, our method fits into the literature on structural estimation that avoids the solution of the dynamic programming problem. This estimation exercise is implemented on a dataset consisting on an unbalanced panel of 3060 Spanish manufacturing firms for the period 1990-1997.

    Download Info

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below under "Related research" whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Bibliographic Info

    Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2001 with number 163.

    as in new window
    Length:
    Date of creation: 01 Apr 2001
    Date of revision:
    Handle: RePEc:sce:scecf1:163

    Contact details of provider:
    Email:
    Web page: http://www.econometricsociety.org/conference/SCE2001/SCE2001.html
    More information through EDIRC

    Related research

    Keywords: Structural estimation; applied microeconometrics; investment models; nonconvex adjustment costs;

    Find related papers by JEL classification:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:sce:scecf1:163. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.