Econometric Analysis of Irreversible Investment with Financial Constraints: Comparison of Parametric and Semiparametric Estimations
This analysis investigates irreversible investment with financial constraints by parametric and semiparametric estimations. The analysis examines four U.S. industries, employing a sample selection model as it develops its econometric model in accordance with real options theory. The analysis finds that liquidity positively affects capital investment, which is compatible with the theory. In addition, while investment is insensitive to sales revenue and operating costs, capital stock negatively affects investment. The analysis also finds that the sample selection bias is large and that a biased OLS estimator underestimates the coefficients of interest. The analysis' model selection is inconclusive.
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- Pagan,Adrian & Ullah,Aman, 1999.
Cambridge University Press, number 9780521355643, January.
- Pagan,Adrian & Ullah,Aman, 1999. "Nonparametric Econometrics," Cambridge Books, Cambridge University Press, number 9780521586115, January.
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- Abel, Andrew B. & Eberly, Janice C., 1998. "The mix and scale of factors with irreversibility and fixed costs of investment," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 48(1), pages 101-135, June.
- Andrew B. Abel & Janice C. Eberly, 1997. "The Mix and Scale of Factors with Irreversibility and Fixed Costs of Investment," NBER Working Papers 6148, National Bureau of Economic Research, Inc.
- Whitney K. Newey, 2009. "Two-step series estimation of sample selection models," Econometrics Journal, Royal Economic Society, vol. 12(s1), pages 217-229, 01.
- Whitney Newey, 1999. "Two Step Series Estimation of Sample Selection Models," Working papers 99-04, Massachusetts Institute of Technology (MIT), Department of Economics.
- Steven M. Fazzari & R. Glenn Hubbard & BRUCE C. PETERSEN, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
- Steven Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1987. "Financing Constraints and Corporate Investment," NBER Working Papers 2387, National Bureau of Economic Research, Inc.
- Gary Chamberlain, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Oxford University Press, vol. 47(1), pages 225-238.
- Ichimura, H., 1991. "Semiparametric Least Squares (sls) and Weighted SLS Estimation of Single- Index Models," Papers 264, Minnesota - Center for Economic Research. Full references (including those not matched with items on IDEAS)
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