Investment, Tobin's Q, and Multiple Capital Inputs

Bob Chirinko

No 2033, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Despite their solid theoretical basis, models of business investment based on Tobin's Q theory have recorded a generally disappointing empirical performance. This paper examines one possible source of misspecification. When the firm's technology is expanded to include two or more capital inputs, the investment equation following from maximizing behavior includes Q as well as a series of additional explanatory variables. The importance of these omitted variables is assessed, and the econometric evidence is mixed, as the Multi-Capital Q model clearly dominates the Conventional specification but empirical problems remain. In addition, the implications of the parameter estimates from the Conventional and Multi-Capital models for tax policy are noted.

Date: 1986-10
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published as "Multiple Capital Inputs, Q, and Investment Spending", JEDC, Vol. 17, no. 5/6 (1993): 907-928.

Downloads: (external link)
http://www.nber.org/papers/w2033.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:2033

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w2033

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 ().