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Firm Level Investment in France and the United States: An Exploration of What We Have Learned in Twenty Years

  • Hall, Bronwyn H.
  • Mairesse, Jacques
  • Mulkay, Benoit

Our two related goals in this paper are the following: Firstly and mainly, we want to examine the effects of major changes in modelling strategy and econometric methodology, over the past twenty years, on estimation of firm-level investment equations using panel data. Secondly, we try to assess whether the differences in the estimated investment equations, as between recent years and ten to twenty years ago in the French and U.S. Manufacturing industries, are 'real' and economically meaningful. Thus our paper consists of a series of comparisons: a simple accelerator-profit specification versus one with error correction, traditional between- and within-firm estimation versus GMM estimation, the investment behavior of French firms versus that of U.S. firms, and investment behavior in recent years versus ten to twenty years ago. Although the important econometric advances of the past twenty years have been far from being as successful as we had hoped for, we do find some significant improvement in the specification, estimation and interpretation of firm investment equations; we also find some real changes in the investment behavior of French and U.S. firms during these twenty years.

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Paper provided by Department of Economics, Institute for Business and Economic Research, UC Berkeley in its series Department of Economics, Working Paper Series with number qt5tp4r5nm.

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Date of creation: 01 Jun 1998
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Handle: RePEc:cdl:econwp:qt5tp4r5nm
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