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Investment demand at the firm level : The case of Spain 1

  • Gonzalo Mato (a1)

Summary

In this paper we estimate an investment demand function derived from a standard adjustment costs framework. We also suppose that the speed of adjustment depends on the capacity of the firms to finance their investment projects with their own generated resources. The model is estimated for a sample of 140 firms and 4 years (1978-81).

Using the consistent within-groups estimator, the main results are : 1) expected output appears as the most important determinant of investment ; 2) profits affect investment in the long-run only through the adjustment cost channel ; 3) relative factor prices are not significant, reflecting a very slow substitution between labour and capital in spanish industry.

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Investment demand at the firm level : The case of Spain 1

  • Gonzalo Mato (a1)

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