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Investment in Greek manufacturing under irreversibility and uncertainty: the message in used capital expenditures

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  • Konstantinos Dimitrios Drakos
  • Eleftherios Goulas

Abstract

This article contributes to the existing literature by showing that uncertainty produces a nonuniform impact to the extent that different types of capital goods exhibit heterogeneous irreversibility, which we define as asset-specific irreversibility. Hence, asset-specific irreversibility is responsible for asymmetries in responses across types of capital goods to uncertainty. We also show that for a given type of capital good, uncertainty produces a variety of responses across sectors, which we define sector-specific irreversibility. In other words, sectoral differences in terms of the ability to substitute a given type of capital with labour, introduce a second-order effect of uncertainty on investment.

Suggested Citation

  • Konstantinos Dimitrios Drakos & Eleftherios Goulas, 2010. "Investment in Greek manufacturing under irreversibility and uncertainty: the message in used capital expenditures," Applied Economics, Taylor & Francis Journals, vol. 42(14), pages 1797-1809.
    • Handle: RePEc:taf:applec:v:42:y:2010:i:14:p:1797-1809
    DOI: 10.1080/00036840701736040
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    References listed on IDEAS

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    1. Hjalmar Böhm & Michael Funke & Nikolaus A. Siegfried, 1999. "Discovering the Link between Uncertainty and Investment - Microeconometric Evidence from Germany," Quantitative Macroeconomics Working Papers 19906, Hamburg University, Department of Economics.
    2. Paul Butzen & Catherine Fuss & Philip Vermeulen, 2002. "The impact of uncertainty on investment plans," Working Paper Research 24, National Bank of Belgium.
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    Cited by:

    1. Goulas, Eleftherios & Zervoyianni, Athina, 2013. "Growth, deficits and uncertainty: Theoretical aspects and empirical evidence from a panel of 27 countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 53(4), pages 380-392.
    2. Eleftherios Goulas & Athina Zervoyianni, 2013. "Growth, Deficits and Uncertainty: Theoretical Aspects and Empirical Evidence," Working Paper series 53_13, Rimini Centre for Economic Analysis.
    3. Theodore Panagiotidis & Panagiotis Printzis, 2019. "What is the Investment Loss due to Uncertainty?," Working Paper series 19-06, Rimini Centre for Economic Analysis.
    4. Maria Elena Bontempi, 2016. "Investment--uncertainty relationship: differences between intangible and physical capital," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 25(3), pages 240-268, April.

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