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Factors in business investment: an expectation based approach using business survey data

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    (Doctorant à l'UMR IDHE,Ecole Normale Supérieure de Cachan)



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    This paper analyses the determinants of the investment decision by focusing on the firms subjective judgments about the impact of some economic factors. This work uses data from the INSEEs business surveys on investment in the industry, over the period 1991-2002. In October, these data contain firms opinions about the effect of the different determinants on their expected capital expenditures. These original and complex data are first studied by using the aggregate indicators (opinions balances, for example) traditionally used by economic forecasters. We then identify a hierarchy that clearly separates real factors (demand, profits and technology) from financial ones. Nevertheless, this hierarchy is only based on aggregate opinions about factors. That is why we estimate the relationship between opinions about each factor effect and expected investment spending by using a random effects Tobit model applied on individual data. This approach emphasizes on the degree of coherence between opinions and plans. Moreover, capital expenditures are distinguished according to their main economic purpose: expansion of production capacity, modernization or rationalization, replacement and new products manufacturing. One main result is that respondents clearly evaluate each factor effect by referring to specific kinds of spending, and not to their global investment. As an example, opinions about expected demand only appear consistent with investments aiming at expanding production capacity. The previous hierarchy is then globally confirmed and significantly refined.

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    File Function: Document de travail de la DESE numéro G2004-04
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    Paper provided by Institut National de la Statistique et des Etudes Economiques, DESE in its series Documents de Travail de la DESE - Working Papers of the DESE with number g2004-04.

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    Date of creation: 2004
    Handle: RePEc:crs:wpdeee:g2004-04
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    1. Richard Duhautois, 2001. "Le ralentissement de l'investissement est plutôt le fait des petites entreprises tertiaires," Économie et Statistique, Programme National Persée, vol. 341(1), pages 47-66.
    2. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
    3. Carruth, Alan & Dickerson, Andrew & Henley, Andrew, 2000. " What Do We Know about Investment under Uncertainty?," Journal of Economic Surveys, Wiley Blackwell, vol. 14(2), pages 119-153, April.
    4. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics,in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier.
    5. F. Modigliani & H. M. Weingartner, 1958. "Forecasting Uses of Anticipatory Data on Investment and Sales," The Quarterly Journal of Economics, Oxford University Press, vol. 72(1), pages 23-54.
    6. Jean-Pierre Cling, 1989. "Les entreprises industrielles prévoient mieux leur investissement et leur chiffre d'affaires qu'il y a vingt ans," Économie et Statistique, Programme National Persée, vol. 224(1), pages 3-13.
    7. Henry, Claude, 1974. "Investment Decisions Under Uncertainty: The "Irreversibility Effect."," American Economic Review, American Economic Association, vol. 64(6), pages 1006-1012, December.
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