Non-Convexities in the Adjustment of Different Capital Inputs: A Firm-Level Investigation

40 Pages Posted: 13 May 2003

See all articles by Alessandra Del Boca

Alessandra Del Boca

University of Brescia - Department of Economics

Marzio Galeotti

University of Milan - Department of Environmental Science and Policy (ESP); Fondazione Eni Enrico Mattei (FEEM); GREEN - Centre for Research on Geography, Resources, Environment, Energy & Networks

Paola Rota

University of Brescia - Department of Economics

Date Written: April 2003

Abstract

Recent developments in investment research have highlighted the importance of non-convexities and irreversibilities in the firms' adjustment of quasi-fixed inputs. However, aggregation across capital goods may smooth out the discontinuities associated with the adjustment of individual assets. The lack of suitable data is one of the reasons why empirical work has strongly relied on the assumption of capital homogeneity. In this paper we exploit a new data set of 1539 Italian firms which allows us to disaggregate capital and consider separately purchases and sales of assets. We disaggregate between equipment and structures and construct measures of fundamental Q to capture investment opportunities associated with each asset. To uncover the pattern of dynamic adjustment we use non-parametric techniques to relate each individual investment to own fundamental Q.

Keywords: Investment, Heterogenous Capital, Non-convexities, Fundamental Q, Panel Data

JEL Classification: D24, G31, C33, C34

Suggested Citation

Del Boca, Alessandra and Galeotti, Marzio and Rota, Paola, Non-Convexities in the Adjustment of Different Capital Inputs: A Firm-Level Investigation (April 2003). Available at SSRN: https://ssrn.com/abstract=406441 or http://dx.doi.org/10.2139/ssrn.406441

Alessandra Del Boca

University of Brescia - Department of Economics ( email )

Via San Faustino 74B
Brescia, 25122
Italy

Marzio Galeotti (Contact Author)

University of Milan - Department of Environmental Science and Policy (ESP) ( email )

2 via Celoria
Milano, 20133
Italy
+39-2-50316470 (Phone)
+39-2-50316486 (Fax)

HOME PAGE: http://www.unimi.it/chiedove/cv/ENG/marzio_galeotti.pdf?1531977155891

Fondazione Eni Enrico Mattei (FEEM) ( email )

Corso Magenta 63
Milan, 20123
Italy

HOME PAGE: http://www.feem.it

GREEN - Centre for Research on Geography, Resources, Environment, Energy & Networks ( email )

via Rontgen
Milan, 20123
Italy

HOME PAGE: http://https://www.green.unibocconi.eu

Paola Rota

University of Brescia - Department of Economics ( email )

Via San Faustino 74B
Brescia, 25122
Italy

HOME PAGE: http://www.eco.unibs.it/~segdse/rota/

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