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Non-convexities in the Adjustment of Different Capital Inputs: A Firm-level Investigation

Alessandra Del Boca (), Marzio Galeotti and Paola Rota
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Paola Rota: University of Brescia

No 2003.35, Working Papers from Fondazione Eni Enrico Mattei

Abstract: Recent developments in investment research have highlighted the importance of non-convexities and irreversibilities in the firms’ adjustment of quasi-fixed inputs. However, aggregation across capital goods may smooth out the discontinuities associated with the adjustment of individual assets. The lack of suitable data is one of the reasons why empirical work has strongly relied on the assumption of capital homogeneity. In this paper we exploit a new data set of 1539 Italian firms which allows us to disaggregate capital and consider separately purchases and sales of assets. We disaggregate between equipment and structures and construct measures of fundamental Q to capture investment opportunities associated with each asset. To uncover the pattern of dynamic adjustment we use non-parametric techniques to relate each individual investment to own fundamental Q.

Keywords: Investment; heterogenous capital; non-convexities; fundamental Q; panel data (search for similar items in EconPapers)
JEL-codes: C33 C34 D24 G31 (search for similar items in EconPapers)
Date: 2003-04
New Economics Papers: this item is included in nep-mic
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Related works:
Journal Article: Non-convexities in the adjustment of different capital inputs: A firm-level investigation (2008) Downloads
Working Paper: Non-convexities in the adjustment of different capital inputs: a firm-level investigation (2002) Downloads
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