Capital adjustment patterns in Swedish manufacturing firms : what models do they suggest?
2001 (English)Report (Other academic)
In this paper we study the capital adjustment process in Swedish manufacturing firms and relate the empirical findings to standard models of firm behavior in the presence of impediments to capital adjustments. We find that (i) a model with irreversible capital goes a very long way in capturing the salient features of firm-level capital adjustment behavior. To see this, an integrated approach is necessary since different alternative models do well in certain comparative dimensions but not in others. (ii) The partial adjustment model generally fails to explain capital adjustment patterns. (iii) The capital accumulation process is a highly volatile and non-persistent process on the firm-level. (iv) Firms adjustment behavior is asymmetric in that they are more likely to tolerate excess capital than shortages of capital, and finally, (v) the estimated adjustment function implies that aggregate investment is relatively unresponsive to aggregate shocks in deep recessions as compared to the responsiveness in normal times.
Place, publisher, year, edition, pages
Uppsala: Nationalekonomiska institutionen , 2001. , 39 p.
Working paper, ISSN 0284-2904
IdentifiersURN: urn:nbn:se:uu:diva-2523ISBN: 99-3536162-4OAI: oai:DiVA.org:uu-2523DiVA: diva2:128784