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Investment slowdown in the 90s: small or large firms? Manufacturing or services industry?

Author

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  • R. DUHAUTOIS

    (Insee)

Abstract

Investment of French firms remained weak in the first part of the 90's, after allowing for the sluggish economic growth. Macroeconomic models failed to explain this low level. In this work, we examine the link between micro-level data and aggregate fluctuations. We first describe the evolution of investment using a large panel of French firms, distinguishing the size and the industry. We afterwards estimate an investment equation which enables us to check whether these firms were subject to financial constraints. Our main results are : (1) mark-up and leverage have larger significant effects for small firms during recessions than high-growth periods ; (2) Interest rate and mark-up play a more important role in the services industry than in the manufacturing industry ; (3) All the effects of studied determinants - i.e mark-up, leverage and interest rate - decrease with firm size ; (4) The biggest firms make their investment decisions independently of these determinants.

Suggested Citation

  • R. Duhautois, 2000. "Investment slowdown in the 90s: small or large firms? Manufacturing or services industry?," Documents de Travail de l'Insee - INSEE Working Papers g2000-10, Institut National de la Statistique et des Etudes Economiques.
    • Handle: RePEc:nse:doctra:g2000-10
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    File URL: https://www.bnsp.insee.fr/ark:/12148/bc6p06zqr5t/f1.pdf
    File Function: Document de travail de la DESE numéro G2000-10
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    More about this item

    Keywords

    investment; financial constraints; estimation;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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