Abstract

http://ssrn.com/abstract=226095
 
 

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Estimating Adjustment Costs with Data on Heterogeneous Capital Goods


Austan Goolsbee


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

David B. Gross


Compass Lexecon

December 1997

NBER Working Paper No. w6342

Abstract:     
This paper estimates the micro-level costs of adjusting capital using detailed data on" investment decisions in the US airline industry. The data include the capital stock retirement, market values, operating costs, and utilization rates of 16 different types of capital" goods for each airline. This data on heterogeneous capital goods allows us to estimate the" desired stock of capital for each type of plane while controlling for unobserved changes in airline" profitability. The results show clear evidence of non-convex adjustment costs inaction for capital investment and quadratic adjustment costs conditional on positive or negative" investment. The adjustment costs for utilization show similar non-convexities but with smaller" adjustment costs. Aggregating to the firm level or using accounting data obscures the non-convexities and biases the estimated adjustment costs upward."

Number of Pages in PDF File: 47

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Date posted: August 26, 2000  

Suggested Citation

Goolsbee, Austan and Gross, David B., Estimating Adjustment Costs with Data on Heterogeneous Capital Goods (December 1997). NBER Working Paper No. w6342. Available at SSRN: http://ssrn.com/abstract=226095

Contact Information

Austan Goolsbee (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-5869 (Phone)
773-702-0458 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
David B. Gross
Compass Lexecon ( email )
332 South Michigan Avenue
Suite 1300
Chicago, IL 60604
United States
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