The effect of uncertainty on investment: Evidence from EU survey data

Atanas Kolev and Timothy Randall

No 2024/02, EIB Working Papers from European Investment Bank (EIB)

Abstract: Using firm-level survey data combined with firm-level financial information, we investigate the effect of a subjective, firm-specific measure of uncertainty on firm investment and employment growth in the European Union. We find that uncertainty has an economically significant negative effect on investment. Uncertainty is found to have an economically significant negative effect on employment growth, as well. Firms perceiving uncertainty as a major investment impediment experience 1 p.p. lower employment growth compared to those that do not. Using our estimates, we find that non-financial corporate investment in the European Union in 2022 would have been higher by 1 p.p. of fixed assets, while employment growth would have been by 0.7 p.p. higher had uncertainty remained at its 2021 levels.

JEL-codes: D22 D84 G31 (search for similar items in EconPapers)
Date: 2024
New Economics Papers: this item is included in nep-bec, nep-cfn and nep-eec
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:eibwps:296480

DOI: 10.2867/723130

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