Investment and firm dynamics

Pablo D'Erasmo

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper I ask whether a model of ¯rm capital accumulation with entry and exit calibrated to match the investment regularities of U.S. establishments is capable of generating the dependence of ¯rm dynamics on size and age. Firms face uncertainty in the form of idiosyncratic productivity shocks and are subject to non-convex capital adjustment costs. I solve for the stationary equilibrium to show that the model can account for the simultaneous dependence of industry dynamics on size (once we condition on age) and on age (once we condition on size).

Keywords: firm dynamics; investment; financial constraints (search for similar items in EconPapers)
JEL-codes: D21 E22 G11 (search for similar items in EconPapers)
Date: 2006-03, Revised 2007-04
New Economics Papers: this item is included in nep-bec, nep-dge, nep-ent, nep-mac and nep-tid
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https://mpra.ub.uni-muenchen.de/4032/1/MPRA_paper_4032.pdf revised version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:3598

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