Estimating Adjustment Costs with Data on Heterogeneous Capital Goods / Austan Goolsbee, David B. Gross.

Format:

Book

Author/Creator:

Goolsbee, Austan.

Contributor:

National Bureau of Economic Research.

Gross, David B.

Series:

Working Paper Series (National Bureau of Economic Research) no. w6342.

NBER working paper series no. w6342

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1997.

Summary:

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."

Notes:

Print version record

December 1997.