Labour adjustment costs: Estimation of a dynamic discrete choice model using panel data for Greek manufacturing firms

2009 ◽  
Vol 16 (5) ◽  
pp. 521-533 ◽  
Author(s):  
Athanasios Lapatinas
Keyword(s):  
Panel Data ◽  
Discrete Choice ◽  
Choice Model ◽  
Adjustment Costs ◽  
Discrete Choice Model ◽  
Manufacturing Firms ◽  
Dynamic Discrete Choice ◽  
Dynamic Discrete Choice Model

Adjustment Costs and Irreversibility as Determinants of Investment: Evidence from African Manufacturing

2005 ◽  
Vol 4 (1) ◽  
Author(s):  
Arne Bigsten ◽  
Paul Collier ◽  
Stefan Dercon ◽  
Marcel Fafchamps ◽  
Bernard Gauthier ◽  
...  
Keyword(s):  
Discrete Choice ◽  
Choice Model ◽  
Adjustment Costs ◽  
Manufacturing Firms ◽  
Fixed Costs ◽  
Dynamic Discrete Choice ◽  
African Countries ◽  
Dynamic Discrete Choice Model ◽  
Capital Adjustment ◽  
Investment Patterns

Abstract In this paper we investigate if the predictions of three different models of capital adjustment costs are consistent with the observed investment patterns among manufacturing firms in five African countries. We document a high frequency of zero investment episodes, which is consistent with both fixed adjustment costs and irreversibility and inconsistent with quadratic adjustment costs. We model the decision to invest using a dynamic discrete choice model and find evidence of irreversibility and not fixed costs. We finally model the investment rate as a function of the size of the capital disequilibrium. The results confirm that irreversibility is an important factor affecting the investment behaviour of African manufacturing firms. Some implications of this finding are discussed.

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