Investment Frictions and the Aggregate Output Loss in China

Guiying Wu ()

No 1307, Economic Growth Centre Working Paper Series from Nanyang Technological University, School of Social Sciences, Economic Growth Centre

Abstract: Investment frictions reduce, delay or protract investment expenditure that is necessary for ?rms to capture growth opportunities. Using a capital adjust- ment costs framework, this paper estimates the gap between China?s actual and frictionless aggregate output. It applies the method of simulated moments to a fully structural investment model on a panel of Chinese ?rms; and takes into ac- count potential unobserved heterogeneities and measurement errors in the data. The estimated capital adjustment costs are substantial and vary across ?rms of di¤erent sizes, and across regions with di¤erent investment environments. If Chinese ?rms had faced a lower level of adjustment costs such as in the U.S., China?s aggregate output would be 25% higher.

Keywords: Investment; Capital Adjustment Costs; Method of Simulated Moments (search for similar items in EconPapers)
JEL-codes: C15 D92 E22 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2013-07
New Economics Papers: this item is included in nep-mac, nep-pbe, nep-sea and nep-tra
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http://www3.ntu.edu.sg/hss2/egc/wp/2013/2013-07.pdf (application/pdf)

Related works:
Journal Article: Investment Frictions and the Aggregate Output Loss in China (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:nan:wpaper:1307

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