The effects of irreversibility and uncertainty on capital accumulation:
When investment decisions cannot be reversed and returns to capital are uncertain, the firm faces a higher user cost of capital than if it could reverse its decisions. This higher user cost tends to reduce the firm's capital stock. Opposing this effect is the irreversibility constraint itself:...
Gespeichert in:
| Beteiligte Personen: | , |
|---|---|
| Format: | Buch |
| Sprache: | Englisch |
| Veröffentlicht: |
Cambridge, Mass.
1995
|
| Schriftenreihe: | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series
5363 |
| Schlagwörter: | |
| Zusammenfassung: | When investment decisions cannot be reversed and returns to capital are uncertain, the firm faces a higher user cost of capital than if it could reverse its decisions. This higher user cost tends to reduce the firm's capital stock. Opposing this effect is the irreversibility constraint itself: when the constraint binds, the firm would like to sell capital but cannot. This effect tends to increase the firm's capital stock. We show that a firm with irreversible investment may have a higher or a lower expected capital stock, even in the long run, compared to an otherwise identical firm with reversible investment. Furthermore, an increase in uncertainty can either increase or decrease the expected long-run capital stock under irreversibility relative to that under reversibility. However, changes in the expected growth rate of demand, the interest rate, the capital share in output, and the price elasticity of demand all have unambiguous effects. |
| Umfang: | 42 S. |
Internformat
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| 245 | 1 | 0 | |a The effects of irreversibility and uncertainty on capital accumulation |c Andrew B. Abel ; Janice C. Eberly |
| 264 | 1 | |a Cambridge, Mass. |c 1995 | |
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| 490 | 1 | |a National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |v 5363 | |
| 520 | |a When investment decisions cannot be reversed and returns to capital are uncertain, the firm faces a higher user cost of capital than if it could reverse its decisions. This higher user cost tends to reduce the firm's capital stock. Opposing this effect is the irreversibility constraint itself: when the constraint binds, the firm would like to sell capital but cannot. This effect tends to increase the firm's capital stock. We show that a firm with irreversible investment may have a higher or a lower expected capital stock, even in the long run, compared to an otherwise identical firm with reversible investment. Furthermore, an increase in uncertainty can either increase or decrease the expected long-run capital stock under irreversibility relative to that under reversibility. However, changes in the expected growth rate of demand, the interest rate, the capital share in output, and the price elasticity of demand all have unambiguous effects. | ||
| 650 | 4 | |a Mathematisches Modell | |
| 650 | 4 | |a Capital investments |x Mathematical models | |
| 650 | 4 | |a Capital |x Mathematical models | |
| 650 | 4 | |a Saving and investment |x Mathematical models | |
| 700 | 1 | |a Eberly, Janice C. |e Verfasser |0 (DE-588)124670202 |4 aut | |
| 830 | 0 | |a National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |v 5363 |w (DE-604)BV002801238 |9 5363 | |
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| id | DE-604.BV010640603 |
| illustrated | Not Illustrated |
| indexdate | 2024-12-20T09:58:08Z |
| institution | BVB |
| language | English |
| oai_aleph_id | oai:aleph.bib-bvb.de:BVB01-007099329 |
| oclc_num | 33962128 |
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| owner_facet | DE-19 DE-BY-UBM DE-521 |
| physical | 42 S. |
| publishDate | 1995 |
| publishDateSearch | 1995 |
| publishDateSort | 1995 |
| record_format | marc |
| series | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |
| series2 | National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series |
| spelling | Abel, Andrew B. Verfasser aut The effects of irreversibility and uncertainty on capital accumulation Andrew B. Abel ; Janice C. Eberly Cambridge, Mass. 1995 42 S. txt rdacontent n rdamedia nc rdacarrier National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 5363 When investment decisions cannot be reversed and returns to capital are uncertain, the firm faces a higher user cost of capital than if it could reverse its decisions. This higher user cost tends to reduce the firm's capital stock. Opposing this effect is the irreversibility constraint itself: when the constraint binds, the firm would like to sell capital but cannot. This effect tends to increase the firm's capital stock. We show that a firm with irreversible investment may have a higher or a lower expected capital stock, even in the long run, compared to an otherwise identical firm with reversible investment. Furthermore, an increase in uncertainty can either increase or decrease the expected long-run capital stock under irreversibility relative to that under reversibility. However, changes in the expected growth rate of demand, the interest rate, the capital share in output, and the price elasticity of demand all have unambiguous effects. Mathematisches Modell Capital investments Mathematical models Capital Mathematical models Saving and investment Mathematical models Eberly, Janice C. Verfasser (DE-588)124670202 aut National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series 5363 (DE-604)BV002801238 5363 |
| spellingShingle | Abel, Andrew B. Eberly, Janice C. The effects of irreversibility and uncertainty on capital accumulation National Bureau of Economic Research <Cambridge, Mass.>: NBER working paper series Mathematisches Modell Capital investments Mathematical models Capital Mathematical models Saving and investment Mathematical models |
| title | The effects of irreversibility and uncertainty on capital accumulation |
| title_auth | The effects of irreversibility and uncertainty on capital accumulation |
| title_exact_search | The effects of irreversibility and uncertainty on capital accumulation |
| title_full | The effects of irreversibility and uncertainty on capital accumulation Andrew B. Abel ; Janice C. Eberly |
| title_fullStr | The effects of irreversibility and uncertainty on capital accumulation Andrew B. Abel ; Janice C. Eberly |
| title_full_unstemmed | The effects of irreversibility and uncertainty on capital accumulation Andrew B. Abel ; Janice C. Eberly |
| title_short | The effects of irreversibility and uncertainty on capital accumulation |
| title_sort | the effects of irreversibility and uncertainty on capital accumulation |
| topic | Mathematisches Modell Capital investments Mathematical models Capital Mathematical models Saving and investment Mathematical models |
| topic_facet | Mathematisches Modell Capital investments Mathematical models Capital Mathematical models Saving and investment Mathematical models |
| volume_link | (DE-604)BV002801238 |
| work_keys_str_mv | AT abelandrewb theeffectsofirreversibilityanduncertaintyoncapitalaccumulation AT eberlyjanicec theeffectsofirreversibilityanduncertaintyoncapitalaccumulation |