D'Erasmo, Pablo (2006): Investment and firm dynamics.
Download (384Kb) | Preview
In this paper I ask whether a model of ¯rm capital accumulation with entry and exit calibrated to match the investment regularities of U.S. establishments is capable of generating the dependence of ¯rm dynamics on size and age. Firms face uncertainty in the form of idiosyncratic productivity shocks and are subject to non-convex capital adjustment costs. I solve for the stationary equilibrium to show that the model can account for the simultaneous dependence of industry dynamics on size (once we condition on age) and on age (once we condition on size).
|Item Type:||MPRA Paper|
|Institution:||University of Texas at Austin|
|Original Title:||Investment and firm dynamics|
|Keywords:||firm dynamics; investment; financial constraints|
|Subjects:||D - Microeconomics > D2 - Production and Organizations > D21 - Firm Behavior: Theory
G - Financial Economics > G1 - General Financial Markets > G11 - Portfolio Choice; Investment Decisions
E - Macroeconomics and Monetary Economics > E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment > E22 - Capital; Investment; Capacity
|Depositing User:||Pablo D'Erasmo|
|Date Deposited:||17. Jun 2007|
|Last Modified:||13. Feb 2013 00:07|
Abel, A. and Eberly, J (1996).Optimal Investment with costly reversibility, Review of Economic Studies, 63, pp. 1369-84. Abel, A. and Eberly, J (1999).Investment and q with ¯xed costs: An empirical Anlysis, NBER working paper, # 6148. Adda J. and R. Cooper, (2003). Dynamic Economics, Cambridge, MA: The MIT Press. Boyarchenko, S. (2006).Firm Dynamics in a Competitive Industry, University of Texas at Austin. Albuquerque,R. and H.A. Hopenhayn (2004).Optimal Lending Contracts and Firm Dynamics, Review of Economic Studies, 71 (2), pp. 285-315. Caballero, R and Engel, E (1999).Explaining Investment Dynamics in the U.S. Manufacturing: A Generalized (S; s) Approach, Econometrica, Econometric Society, vol 67(4), pp. 783-826. Caballero, R; Engel, E and Haltiwanger, J. (1995).Plant-level Adjustment and Aggregate Investment Dynamics, American Economic Review, 87, pp. 115-137. Campbell, J. and Fisher, J. (2000).Aggregate Employment Fluctuations with Microeconomic Asymetries, American Economic Review, 90(5), pp. 1323-45. Castro, R; Clementi, G and Corbae, D. (2005). Information and Firm Dy- namics, mimeo. Clementi, G.L. and H.A. Hopenhayn (2006).A Theory of Financing Con- straints and Firm Dynamics, Quarterly Journal of Economics, 121 (1), pp. 229-265. Cooley, Thomas and Quadrini, Vincenzo (2001).Financial Markets and Firm Dynamics, American Economic Review, 91 (5), pp. 1286-310. Cooper, Russell and Ejarque, Jao (2002).Financial Frictions and investment: requiem in Q, Review of Economic Dynamics, 6, pp. 710-728. Russell Cooper and John Haltiwanger,(2006). On the Nature of Capital Ad- justment Costs, Review of Economic Studies, 73(3), pp 611-633. Russell Cooper, John Haltiwanger and Laura Power (1999). Machine Replace- ment and the Business Cycle: Lumps and Bumps, American Economic Re- view, 89(4), pp 921-46. Davis, Steven; Haltiwanger, John and Schuh, Scott, (1996). Job creation and destruction, Cambridge,MA: MIT Press. Dixit, A.K. and R. Pindyck, (1996). Investment under Uncertainty, Princeton: Princeton University Press. Doms, T. and Dunne, T (1994).Capital Adjustment Patterns in Manufactur- ing Plants, Center for Economic Studies, U.S. Bureau of the Census. Doms, T. and Dunne, T (1997).Capital Adjustment Patterns in Manufactur- ing Plants, Review of Economic Dynamics, 1, pp. 409-429. Dunne, Timothy, Roberts, Mark and Samuelson, Larry (1988).Patterns of ¯rm entry and exit in U.S. manufacturing industries, RAND Journal of Economics, 19 (4), pp. 495-515. Erickson, T. and Whited, T. (2000).Measurement error and the relationship between investment and Q, Journal of Political Economy, 108, pp. 1027-1057. Evans, David (1987).Tests of Alternative Theories of Firm Growth, Journal of Political Economy, 95 (4), pp. 657-74. Fuentes O., S. Gilchrist and M. Rysman (2006).Discrete Adjustment Costs and Investment Dynamics for Chilean Manufacturing Firms: A Maximum Likelihood Approach, mimeo. Gomes, Jao (2001).Financing Investment, American Economic Review, 91 (5), pp. 1263-85. Hall, Bronwyn (1987).The relationship between ¯rm size and ¯rm growth in the U.S. manufacturing sector, Journal of Industrial Economics, 35 (4), pp. 583-606. Henessy, C. and T. Whited (2007).How Costly is External Financing? Evi- dence from a Structural Estimation, Journal of Finance, Forthcoming. Hopenhayn, Hugo (1992).Entry, Exit, and Firm Dynamics in Long Run Equi- librium, Econometrica, 60 (5), pp. 1127-50. Hopenhayn, Hugo and R., Rogerson (1993).Job Turnover and Policy Evalua- tion: A General Equilibrium Analysis, Journal of Political Economy, 101 (5), pp. 915-38. Jovanovic, Boyan (1982).Selection and the Evolution of Industry, Economet- rica, 50 (3), pp. 649-70. Kaplan, S. and Zinglaes L. (2000).Investment-cash Flow Sensitivities are not Valid Measures of Financing Constraints, Quarterly Journal of Economics, May. Lucas, Robert E. Jr (1978).On the size distribution of Business Firms, Econo- metrica, 50 (3), pp. 649-70. Power, L. (1998).The Missing Link: Technology, Investment, and Productiv- ity, The Review of Economics and Statistics, 80 (2), pp. 300-13. Rossi-Hansberg E. and M. Wright (2006).Establishment Size Dynamics in the Aggregate Economy, manuscript. Sakellaris, P. (2001).Patterns of Plant Adjustment, Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.), 2001-05. Stokey, Nancy; Lucas, Robert E. Jr and Prescott, Edward (1989).Recursive Methods in economic dynamics, Cambridge, MA: Harvard University Press. Tauchen, G. and R. Hussey (1991).Quadrature-based methods for obtaining approximate solutions to nonlinear asset pricing models, Econometrica, 59, pp. 371-96.
Available Versions of this Item
- Investment and firm dynamics. (deposited 17. Jun 2007) [Currently Displayed]