Abstract:This paper studies the nature of capital adjustment at the plant-level. We use an indirect inference procedure to estimate the structural parameters of a rich specification of capital adjustment costs...This paper studies the nature of capital adjustment at the plant-level. We use an indirect inference procedure to estimate the structural parameters of a rich specification of capital adjustment costs. In effect, the parameters are optimally chosen to reproduce the nonlinear relationship between investment and profitability that we uncover in the plant-level data. Our findings indicate that a model which mixes both convex and nonconvex adjustment costs with irreversibility fits the data best.Read More
Publication Year: 2000
Publication Date: 2000-09-01
Language: en
Type: preprint
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Cited By Count: 40
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