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Tobin’s Q, non-constant returns to scale, and imperfectly competitive product markets

Published online by Cambridge University Press:  17 August 2016

Robert S. Chirinko  and
Steven M. Fazzari
Robert S. Chirinko
Affiliation:
University of Chicago
Steven M. Fazzari
Affiliation:
Washington University
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Summary

This study explores the impact of non-constant returns to scale and imperfectly competitive product markets on the empirical performance of the q-model of investment. We present an econometric specification linking the unobserved shadow price of capital to financial market data when returns-to-scale are not necessarily constant and product markets are not necessarily competitive. Furthermore, unlike most Q-studies, we work within a discrete-time framework, and give explicit attention to the relations between inventories, sales, and production. Our new specification allows us to recover parameters characterizing returns-to-scale, product market, and adjustment cost elasticities. Estimates are reported for 12 mature industries in the United States drawn from VALUELINE.

Résumé

Résumé

Cet article analyse l’impact des hypothèses de rendements d’échelle non constant et de concurrence imparfaite des marchés des produits sur les performances empiriques du modèle-Q de l’investissement. Il présente une spécification économétrique qui exprime le prix implicite non observé du capital en fonction des observations sur les marchés financiers lorsque les rendements d’échelle ne sont pas nécessairement constants et que les marchés des produits ne fonctionnent pas nécessairement en concurrence parfaite. En outre, contrairement aux formulations habituelles, notre modèle est développé en temps discret, ce qui explicite de manière plus précise les relations entre les stocks, le niveau des ventes et de la production. Cette nouvelle spécification nous permet d’estimer les paramètres caractérisants les rendements d’échelle, les élasticités des marchés de produits et des coûts d’ajustement. Les estimations sont présentées pour douze industries des Etats-Unis, dont les statistiques proviennent de VALUELINE.

Keywords

131300611131300611
Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 54 , Issue 3 , 1988 , pp. 259 - 275
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1988 

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Footnotes

1

The authors are grateful for comments from an anonymous referee and participants at the Applied Economics Association’s Conference on the Econometrics of Investment and for the excellent research assistance provided by Jaewoon Koo. Errors, omissions, and conclusions remain the sole responsibility of the authors.

References

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