Microeconometric models of investment and employment

By Stephen R. Bond, John Van Reenen. 2003

495 citations recorded by the source corpus.

We survey recent microeconometric research on investment and employment that has used panel data on individual firms or plants. We focus on model specification and econometric estimation issues, but we also review some of the main empirical findings. We discuss advantages and limitations of microeconomic data in this context. We briefly review the neoclassical theory of the demand for capital and labour, on which most of the econometric models of investment and employment that we consider are based. We pay particular attention to dynamic factor demand models, based on the assumption that there are costs of adjustment, which have played a prominent role especially in the microeconometric literature on investment. With adjustment costs, current choices depend on expectations of future conditions. We discuss the challenges that this raises for econometric model specification, and some of the solutions that have been adopted. We also discuss estimation issues that arise for dynamic factor demand equations in the context of micro panel data for firms or plants. We then discuss a number of topics that have been the focus of recent microeconometric research on investment and employment. In particular, we review the literatures on investment and financing constraints, relative price effects on investment and employment, investment and uncertainty, investment in research and development (R&D), elasticities of substitution and complementarity between technology, capital and skilled and unskilled labour, and recent work on models with non-convex adjustment costs.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/1f976b2610962cd0f4cf58933d122126e6525e18

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Citations in the corpus

Internal financial constraints, external financial constraints, and investment choice: Evidence from a panel of UK firms. (2008, methodology): “1995; Hubbard, 1998; and Bond and Van Reenen, 2005, for surveys).”
CEO Gender, Corporate Risk-Taking, and the Efficiency of Capital Allocation (2016, background): “, Booth and Nolen, 2012), or both (e.g., Edwards and O’Neal, 2009). 16 The empirical evidence on this point is mixed. While Bandiera et al. (2015) provide survey-based evidence that Italian female managers are on average less risk tolerant than their male peers, Adams and Funk (2012) find Swedish fe”
Effectiveness of Fiscal Incentives for R&D: Quasi-experimental Evidence (2019, background): “Recent empirical evaluations of fiscal incentives for physical investment include studies by Cummins et al. (1994), Caballero et al.”
Investment and Monetary Policy in the Euro Area (2002, unknown): “It is also consistent with the findings of Caballero et al. (1995), which uses time series econometrics on historical data.”