Is There an Investment Gap in Advanced Economies? If So, Why?

42 Pages Posted: 19 Jul 2017  

Robin Döttling

University of Amsterdam - Finance Group; Tinbergen Institute

German Gutierrez Gallardo

New York University (NYU) - Leonard N. Stern School of Business, Students

Thomas Philippon

New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER)

Date Written: July 2017

Abstract

We analyze private fixed investment across European economies and in the US over the past 20 years. We study the impact of competition and financial constraints on tangible and intangible investment. We find that investment is weak in both regions, but argue that the reasons are cyclical in Europe and structural in the US. In the US, we find that investment is lower than predicted by fundamentals starting around 2000, and that the gap is driven by industries where competition has decreased over time. The decline in US investment has coincided with increased concentration and decreased anti-trust enforcement. In Europe, we find that investment is roughly in line with measures of profitability and Tobin’s

Suggested Citation

Döttling, Robin and Gutierrez Gallardo, German and Philippon, Thomas, Is There an Investment Gap in Advanced Economies? If So, Why? (July 2017). Available at SSRN: https://ssrn.com/abstract=3002796 or http://dx.doi.org/10.2139/ssrn.3002796

Robin Döttling

University of Amsterdam - Finance Group ( email )

Roetersstraat 18
Amsterdam, 1018 WB
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

German Gutierrez Gallardo

New York University (NYU) - Leonard N. Stern School of Business, Students ( email )

NY
United States

Thomas Philippon (Contact Author)

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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