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Firm-level uncertainty and investments: evidence from South Tyrol

Author

Listed:
  • Andrea Locatelli

    (Bank of Italy)

  • Luciano Partacini

    (Chamber of commerce of Bolzano-Bozen)

  • Nicola Riz

    (Chamber of commerce of Bolzano-Bozen)

Abstract

In this paper we introduce a novel measure of uncertainty defined at the micro-level as firms' inability to forecast the evolution of own revenues in the current or subsequent year. In order to do so, we exploit newly-available survey data collected by the Chamber of commerce of Bolzano-Bozen for the period 2014–23. Uncertainty is higher among small firms, operating in construction and manufacturing, and whose legal form is that of a sole proprietorship. Looking at the evolution of uncertainty over time, we find a significant increase in the share of uncertain firms in 2021, which persisted (though to a lesser extent) through the most recent available year, 2023. The overall increase was highest among small firms and among sole proprietorships. We finally analyze the link between firm-level uncertainty and investment behavior: the probability of a firm increasing their own investments is 3.6 percentage points lower among uncertain firms compared with the remaining firms (the average share is just above 20 per cent).

Suggested Citation

  • Andrea Locatelli & Luciano Partacini & Nicola Riz, 2024. "Firm-level uncertainty and investments: evidence from South Tyrol," Questioni di Economia e Finanza (Occasional Papers) 904, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_904_24
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    uncertainty; investments; Covid-19;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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