Investment, Capacity, and Uncertainty: A Putty-Clay Approach
Simon Gilchrist () and
John Williams ()
No 10446, NBER Working Papers from National Bureau of Economic Research, Inc
We embed the microeconomic decisions associated with investment under uncertainty, capacity utilization, and machine replacement in a general equilibrium model based on putty-clay technology. In the presence of irreversible factor proportions, a mean-preserving spread in the productivity of investment raises aggregate investment, productivity, and output. Increases in uncertainty have important dynamic implications, causing sustained increases in investment and hours and a medium-term expansion in the growth rate of labor productivity.
JEL-codes: D24 E22 (search for similar items in EconPapers)
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Published as Gilchrist, Simon and John C. Williams. "Investment, Capacity, And Uncertainty: A Putty-Clay Approach," Review of Economic Dynamics, 2005, v8(1,Jan), 1-27.
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Journal Article: Investment, Capacity, and Uncertainty: A Putty-Clay Approach (2005)
Working Paper: Investment, capacity, and uncertainty: a putty-clay approach (2002)
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