SHERP

Business Fixed Investment and the Structure of Adjustment Costs

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Authors
Abdelgawad, Tamer; Rhee, Changyong
Issue Date
1998
Publisher
Seoul Journal of Economics
Citation
Seoul Journal of Economics 11 (No. 2 1998): 101-126
Keywords
COMPUSAT; Tobit model; irreversivility specification
Abstract
This paper empirically tests an irreversible investment model against the standard convex adjustment cost model using panel data from COMPUSAT. It shows that the reduced form of the optimal irreversible investment decision turns out to be a Tobit model with measurement errors in the dependent variable. Our non-nested test indicates that the evidence for the irreversible investment model is weak: Only 5 firms among our total sample of 56 firms strictly prefer the irreversibility specification.
ISSN
1225-0279
Language
English
URI
http://hdl.handle.net/10371/1129
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College of Social Sciences (사회과학대학)Institute of Economics Research (경제연구소)Seoul Journal of EconomicsSeoul Journal of Economics vol.11(2) (Summer 1998)
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