Extensive and Intensive Investment over the Business Cycle

Boyan Jovanovic () and Peter Rousseau

No 14960, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Investment of U.S. firms responds asymmetrically to Tobin's Q: investment of established firms -- 'intensive' investment -- reacts negatively to Q whereas investment of new firms -- 'extensive' investment -- responds positively and elastically to Q. This asymmetry, we argue, reflects a difference between established and new firms in the cost of adopting new technologies. A fall in the compatibility of new capital with old capital raises measured Q and reduces the incentive of established firms to invest. New firms do not face such compatibility costs and step up their investment in response to the rise in Q. The model fits the data well using aggregates since 1900.

JEL-codes: E22 E32 (search for similar items in EconPapers)
Date: 2009-05
New Economics Papers: this item is included in nep-bec, nep-ent and nep-mac
Note: EFG DAE PR
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published as Boyan Jovanovic & Peter L. Rousseau, 2014. "Extensive and Intensive Investment over the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 122(4), pages 863 - 908.

Downloads: (external link)
http://www.nber.org/papers/w14960.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:14960

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w14960

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().