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Irreversible investment and uncertainty : an empirical study of rice mills in the Mekong river delta, Vietnam

Author

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  • Le, K.N.
  • Hermes, N.
  • Lanjouw, G.

    (Groningen University)

Abstract

This paper investigates the irreversibility of investments and the impact this has on the nature of the relationship between investment and uncertainty. The empirical analysis uses firm-level data and is based on a survey of 210 rice-milling firms in the Mekong River Delta in Vietnam, which was carried out during the year 2000.We show that the relationship between investment and uncertainty is influenced by the extent to which investments are irreversible. In particular, the results indicate that when the degree of irreversibility increases, this increases the negative association between uncertainty and investment.

Suggested Citation

  • Le, K.N. & Hermes, N. & Lanjouw, G., 2003. "Irreversible investment and uncertainty : an empirical study of rice mills in the Mekong river delta, Vietnam," Research Report 03E40, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    • Handle: RePEc:gro:rugsom:03e40
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    File URL: http://irs.ub.rug.nl/ppn/260295124
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    References listed on IDEAS

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    Cited by:

    1. Wolassa L. Kumo, 2006. "Macroeconomic Uncertainty And Aggregate Private Investment In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 74(2), pages 190-204, June.

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