Firm-level uncertainty and investments: evidence from South Tyrol

Andrea Locatelli (), Luciano Partacini () and Nicola Riz ()
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Andrea Locatelli: Bank of Italy
Luciano Partacini: Chamber of commerce of Bolzano-Bozen
Nicola Riz: Chamber of commerce of Bolzano-Bozen

No 904, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: In this paper we introduce a novel measure of uncertainty defined at the micro-level as firms' inability to forecast the evolution of own revenues in the current or subsequent year. In order to do so, we exploit newly-available survey data collected by the Chamber of commerce of Bolzano-Bozen for the period 2014–23. Uncertainty is higher among small firms, operating in construction and manufacturing, and whose legal form is that of a sole proprietorship. Looking at the evolution of uncertainty over time, we find a significant increase in the share of uncertain firms in 2021, which persisted (though to a lesser extent) through the most recent available year, 2023. The overall increase was highest among small firms and among sole proprietorships. We finally analyze the link between firm-level uncertainty and investment behavior: the probability of a firm increasing their own investments is 3.6 percentage points lower among uncertain firms compared with the remaining firms (the average share is just above 20 per cent).

Keywords: uncertainty; investments; Covid-19 (search for similar items in EconPapers)
JEL-codes: D22 D92 E22 (search for similar items in EconPapers)
Date: 2024-12
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