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The Neoclassical Theory of Aggregate Investment and its Criticisms

Daniele Girardi ()
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Daniele Girardi: Department of Economics, University of Massachusetts Amherst (USA)

UMASS Amherst Economics Working Papers from University of Massachusetts Amherst, Department of Economics

Abstract: This paper surveys the neoclassical theory of aggregate investment and its criticisms. We identify four main strands in neoclassical investment theory: (i) the traditional Wicksellian model; (ii) the Fisherian ‘array-of-opportunities’ approach; (iii) the Jorgensonian model; (iv) the now prevailing adjustment cost models. We summarize each approach, discuss the main conceptual issues, and highlight similarities and differences between them. We also provide a systematic summary and discussion of the main criticisms that have been leveled at each of these models and highlight some unresolved theoretical issues.

Keywords: investment; neoclassical theory; adjustment costs (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-cwa, nep-hme, nep-hpe, nep-isf and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:ums:papers:2021-11

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