IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper

Non-convexities in the adjustment of different capital inputs: a firm-level investigation

  • Alessandra Del Boca

    ()

    (Department of Economics, University of Brescia)

  • Marzio Galeotti

    (Department of Economics, University of Bergamo)

  • Paola Rota

    (Department of Economics, University of Brescia)

Recent developments in investment research have highlighted the importance of non-convexities and irreversibilities in the firms’ adjustment of quasi-fixed inputs. However, aggregation across capital goods may smooth out the discontinuities associated with the adjustment of individual assets. The lack of suitable data, is one of the reasons why empirical work has stronlgy relied on the assumption of capital homogeneity. In this paper we exploit a new data set of 1539 Italian firms which allows us to disaggregate across several capital types and consider separately purchases and sales of assets. We start from the basic disaggregation between equipment and structures and construct measures of fundamental Q to capture investment opportunities associated with each asset. To uncover the pattern of dynamic adjustment we use non-parametric techniques to relate each individual investment to own fundamental Q.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://aisberg.unibg.it/bitstream/10446/171/1/WPEco03(2002)Del%20Boca.pdf
File Function: Version, 06-2002
Download Restriction: no

Paper provided by University of Bergamo, Department of Economics in its series Working Papers (-2012) with number 0203.

as
in new window

Length: 44 pages
Date of creation: Jun 2002
Date of revision:
Handle: RePEc:brg:wpaper:0203
Contact details of provider: Postal:
via dei Caniana, 2 - 24127 BERGAMO

Phone: 0039 035 2052111
Web page: http://www.unibg.it/struttura/en_struttura.asp?cerca=en_dse_intro
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Aubhik Khan & Julia K. Thomas, 2002. "Nonconvex factor adjustments in equilibrium business cycle models: Do nonlinearities matter?," Staff Report 306, Federal Reserve Bank of Minneapolis.
  2. Russell Cooper & John Haltiwanger & Laura Power, 1995. "Machine Replacement and the Business Cycle: Lumps and Bumps," NBER Working Papers 5260, National Bureau of Economic Research, Inc.
  3. Whited, Toni M., 1994. "Problems with identifying adjustment costs from regressions of investment on q," Economics Letters, Elsevier, vol. 46(4), pages 327-332, December.
  4. Gaston Gelos, R. & Isgut, Alberto, 2001. "Irreversibilities in fixed capital adjustment: Evidence from Mexican and Colombian plants," Economics Letters, Elsevier, vol. 74(1), pages 85-89, December.
  5. Marcelo Veracierto, 1998. "Plant level irreversible investment and equilibrium business cycles," Working Paper Series WP-98-1, Federal Reserve Bank of Chicago.
  6. Carlsson, Mikael & Laséen, Stefan, 2002. "Capital Adjustment Patterns in Swedish Manufacturing Firms: What Model Do They Suggest?," Working Paper Series 143, Sveriges Riksbank (Central Bank of Sweden).
  7. John Van Reenen & Nick Bloom & Steve Bond, 2006. "Uncertainty and investment dynamics," LSE Research Online Documents on Economics 2645, London School of Economics and Political Science, LSE Library.
  8. Stephen Nickell & D Nicolitsas, 1996. "Does Innovation Encourage Investment in Fixed Capital?," CEP Discussion Papers dp0309, Centre for Economic Performance, LSE.
  9. Julia K. Thomas, 2002. "Is lumpy investment relevant for the business cycle?," Staff Report 302, Federal Reserve Bank of Minneapolis.
  10. Oivind Anti Nilsen & Fabio Schiantarelli, 1996. "Zeroes and Lumps in Investment: Empirical Evidence on Irreversibilities and Non-Convexities," Boston College Working Papers in Economics 337., Boston College Department of Economics, revised 01 Nov 2000.
  11. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1988. "Estimating Vector Autoregressions with Panel Data," Econometrica, Econometric Society, vol. 56(6), pages 1371-95, November.
  12. Schiantarelli, Fabio & Perotti, Roberto & Ardagna, Silvia & Alesina, Alberto, 2002. "Fiscal Policy, Profits, and Investment," Scholarly Articles 4685103, Harvard University Department of Economics.
  13. Caballero, R.J., 1994. "Explaining Investment Dynamics in U.S. Manufacturing: Generalized (S,s) Approach," Working papers 94-32, Massachusetts Institute of Technology (MIT), Department of Economics.
  14. Stephen Bond & Dietmar Harhoff & John Van Reenen, 2005. "Investment, R&D and Financial Constraints in Britain and Germany," Annals of Economics and Statistics, GENES, issue 79-80, pages 433-460.
  15. Simon Gilchrist & Charles P. Himmelberg, 1993. "Evidence on the role of cash flow for investment," Finance and Economics Discussion Series 93-7, Board of Governors of the Federal Reserve System (U.S.).
  16. Letterie, Wilko A. & Pfann, Gerard A., 2007. "Structural identification of high and low investment regimes," Journal of Monetary Economics, Elsevier, vol. 54(3), pages 797-819, April.
  17. Stephen R. Bond & Jason G. Cummins, 2000. "The Stock Market and Investment in the New Economy: Some Tangible Facts and Intangible Fictions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(1), pages 61-124.
  18. Ricardo J. Caballero & Eduardo M. R. A. Engel & John C. Haltiwanger, 1995. "Plant-Level Adjustment and Aggregate Investment Dynamics," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(2), pages 1-54.
  19. Simon Gilchrist & Charles Himmelberg, 1999. "Investment: Fundamentals and Finance," NBER Chapters, in: NBER Macroeconomics Annual 1998, volume 13, pages 223-274 National Bureau of Economic Research, Inc.
  20. Kramarz, Francis & Michaud, Marie-Laure, 2003. "The Shape of Hiring and Separation Costs," CEPR Discussion Papers 3685, C.E.P.R. Discussion Papers.
  21. Caballero, Ricardo J., 1999. "Aggregate investment," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 12, pages 813-862 Elsevier.
  22. Andrew B. Abel & Janice C. Eberly, 1993. "A Unified Model of Investment Under Uncertainty," NBER Working Papers 4296, National Bureau of Economic Research, Inc.
  23. Hayashi, Fumio & Inoue, Tohru, 1991. "The Relation between Firm Growth and Q with Multiple Capital Goods: Theory and Evidence from Panel Data on Japanese Firms," Econometrica, Econometric Society, vol. 59(3), pages 731-53, May.
  24. Valerie A. Ramey & Matthew D. Shapiro, 2001. "Displaced Capital: A Study of Aerospace Plant Closings," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 958-992, October.
  25. Newey, Whitney K & West, Kenneth D, 1987. "Hypothesis Testing with Efficient Method of Moments Estimation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(3), pages 777-87, October.
  26. Abel, Andrew B & Blanchard, Olivier J, 1986. "The Present Value of Profits and Cyclical Movements in Investment," Econometrica, Econometric Society, vol. 54(2), pages 249-73, March.
  27. Suits, Daniel B & Mason, Andrew & Chan, Louis, 1978. "Spline Functions Fitted by Standard Regression Methods," The Review of Economics and Statistics, MIT Press, vol. 60(1), pages 132-39, February.
  28. Elena Bontempi & Alessandra Del Boca & Alessandra Franzosi & Marzio Galeotti & Paola Rota, 2004. "Capital Heterogenity: Does it Matter? Fundamental Q and Investment on a Panel of Italian Firms," RAND Journal of Economics, The RAND Corporation, vol. 35(4), pages 674-690, Winter.
  29. Steve Bond & Clive Bowsher & Frank Windmeijer, 2001. "Criterion-based inference for GMM in autoregressive panel-data models," IFS Working Papers W01/02, Institute for Fiscal Studies.
  30. Barnett, Steven A. & Sakellaris, Plutarchos, 1998. "Nonlinear response of firm investment to Q:: Testing a model of convex and non-convex adjustment costs1," Journal of Monetary Economics, Elsevier, vol. 42(2), pages 261-288, July.
  31. Russell W. Cooper & John C. Haltiwanger, 2006. "On the Nature of Capital Adjustment Costs," Review of Economic Studies, Oxford University Press, vol. 73(3), pages 611-633.
  32. R. Gaston Gelos & Alberto Isgut, 2001. "Fixed Capital Adjustment: Is Latin America Different?," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 717-726, November.
  33. Galeotti, Marzio & Schiantarelli, Fabio, 1994. "Stock Market Volatility and Investment: Do Only Fundamentals Matter?," Economica, London School of Economics and Political Science, vol. 61(242), pages 147-65, May.
  34. Robert S. Pindyck & Julio J. Rotemberg, 1982. "Dynamic Factor Demands Under Rational Expectations," NBER Working Papers 1015, National Bureau of Economic Research, Inc.
  35. Bond, Stephen & Van Reenen, John, 2007. "Microeconometric Models of Investment and Employment," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 6, chapter 65 Elsevier.
  36. Verick, Sher & Letterie, Wilko & Pfann, Gerard A., 2004. "Non-Linearities in the Expansion of Capital Stock," IZA Discussion Papers 1132, Institute for the Study of Labor (IZA).
  37. Steven A. Barnett & Plutarchos Sakellaris, 1999. "A New Look At Firm Market Value, Investment, And Adjustment Costs," The Review of Economics and Statistics, MIT Press, vol. 81(2), pages 250-260, May.
  38. repec:hrv:faseco:3353756 is not listed on IDEAS
  39. Austan Goolsbee & David B. Gross, 1997. "Estimating Adjustment Costs with Data on Heterogeneous Capital Goods," NBER Working Papers 6342, National Bureau of Economic Research, Inc.
  40. R. Gelos & Alberto Isgut, 1999. "Fixed Capital Adjustment; Is Latin America Different? Evidence from the Colombian and Mexican Manufacturing Sectors," IMF Working Papers 99/59, International Monetary Fund.
  41. Ramey, Valerie A. & Shapiro, Matthew D., 1998. "Costly capital reallocation and the effects of government spending," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 48(1), pages 145-194, June.
  42. Andrew B. Abel & Janice C. Eberly, 1996. "Optimal Investment with Costly Reversibility," Review of Economic Studies, Oxford University Press, vol. 63(4), pages 581-593.
  43. Mark Doms & Timothy Dunne, 1994. "Capital Adjustment Patterns in Manufacturing Plants," Working Papers 94-11, Center for Economic Studies, U.S. Census Bureau.
  44. Stephen Bond & Costas Meghir, 1994. "Dynamic Investment Models and the Firm's Financial Policy," Review of Economic Studies, Oxford University Press, vol. 61(2), pages 197-222.
  45. Eberly, Janice C., 1997. "International evidence on investment and fundamentals," European Economic Review, Elsevier, vol. 41(6), pages 1055-1078, June.
Full references (including those not matched with items on IDEAS)

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

When requesting a correction, please mention this item's handle: RePEc:brg:wpaper:0203. 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: (University of Bergamo Library)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.