IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

US Investment 1901-2005: Incumbents, Entrants, and Q

Listed author(s):
  • Peter L. Rousseau

    (Vanderbilt University)

  • Boyan Jovanovic

    (New York University)

Our paper shows that investment by new firms responds to Tobin's Q much more elastically than does investment by incumbent firms. To explain this fact we build a model in which the investment-supply curve of incumbent firms is highly elastic and positively related to Q. However, when variation in Q is caused by shifts in this supply curve, the equilibrium relation between Q and investment that it traces out is negative. That alone causes a negative equilibrium relation between Q and investment. At high levels of Q, however, the investment of incumbents is further reduced, or crowded out, by the positive response of the investment by entering firms to the rise in Q. We fit a composite-capital version of the model to data, and we then repeat the exercise for a physical-capital version.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Society for Economic Dynamics in its series 2008 Meeting Papers with number 696.

in new window

Date of creation: 2008
Handle: RePEc:red:sed008:696
Contact details of provider: Postal:
Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

Web page:

More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:red:sed008:696. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.