On the nature of capital adjustment costs

Russell W. Cooper, John C. Haltiwanger

Research output: Contribution to journalArticlepeer-review

299 Scopus citations

Abstract

This paper studies the nature of capital adjustment at the plant level. We use an indirect inference procedure to estimate the structural parameters of a rich specification of capital adjustment costs. In effect, the parameters are optimally chosen to reproduce a set of moments that capture the non-linear relationship between investment and profitability found in plant-level data. Our findings indicate that a model, which mixes both convex and non-convex adjustment costs, fits the data best.

Original languageEnglish (US)
Pages (from-to)611-633
Number of pages23
JournalReview of Economic Studies
Volume73
Issue number3
DOIs
StatePublished - Jul 2006

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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