On the Nature of Capital Adjustment Costs

摘要

This paper studies the nature of capital adjustment at the plant level.We use an indirect inference procedure to estimate the structural parameters of a rich specification of capital adjustment costs.In effect,the parameters are optimally chosen to reproduce a set of moments that capture the non-linear relationship between investment and profitability found in plant-level data.Our findings indicate that a model,which mixes both convex and non-convex adjustment costs,fits the data best.