Publication Type
Journal Article
Version
publishedVersion
Publication Date
11-2019
Abstract
When investment is irreversible, firms invest only when the mismatch between their productivity and their capital stock is large. This suggests that two factors should be related to the frequency of mismatch: volatility and capital depreciation. A canonical model of industry dynamics with investment irreversibility displays slow growth in times of high uncertainty, and decline is particularly pronounced in industries where capital depreciation is rapid. A differences-in-differences regression using industry growth data from a large sample of countries supports this result.
Keywords
Uncertainty, Depreciation, Irreversible investmentInvestment, lumpiness, Volatility
Discipline
Industrial Organization | Macroeconomics
Research Areas
Macroeconomics
Publication
European Economic Review
Volume
120
First Page
1
Last Page
23
ISSN
0014-2921
Identifier
10.1016/j.euroecorev.2019.103314
Publisher
Elsevier: 24 months
Citation
SAMAIEGO, Roberto and SUN, Juliana Yu.
Uncertainty, depreciation and industry growth. (2019). European Economic Review. 120, 1-23.
Available at: https://ink.library.smu.edu.sg/soe_research/2333
Copyright Owner and License
Publisher
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/j.euroecorev.2019.103314