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Capital Adjustment Patterns in Manufacturing Plants

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  • Mark Doms
  • Timothy Dunne

Abstract

A common result from altering several fundamental assumptions of the neoclassical investment model with convex adjustment costs is that investment may occur in lumpy episodes. This paper takes a step back and asks "How lumpy is the investment?" We answer this question by documenting the distributions of investment and capital adjustment for a sample of over 33,000 manufacturing plants drawn from over 400 four-digit industries. We find that many plants do undergo large investment episodes, however, there is tremendous variation across plants in their capital accumulation patterns. This paper explores how the variation in capital accumulation patterns vary by observable plant and firm characteristics, and how large investment episodes at the plant level transmit into fluctuations in aggregate investment.

Suggested Citation

  • Mark Doms & Timothy Dunne, 1994. "Capital Adjustment Patterns in Manufacturing Plants," Working Papers 94-11, Center for Economic Studies, U.S. Census Bureau.
    • Handle: RePEc:cen:wpaper:94-11
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    File URL: https://www2.census.gov/ces/wp/1994/CES-WP-94-11.pdf
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    More about this item

    Keywords

    Investment; Capital; Spikes;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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