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Investment in Greek Manufacturing under Irreversibility and Uncertainty : the Message in Used Capital Expenditures

[journal article]

Drakos, Konstantinos Dimitrios; Goulas, Eleftherios

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Abstract This paper contributes to the existing literature by showing that uncertainty produces a non-uniform impact to the extent that different types of capital goods exhibit heterogeneous irreversibility, which we define as asset-specific irreversibility. Hence, asset-specific irreversibility is responsible for asymmetries in responses across types of capital goods to uncertainty. We also show that for a given type of capital good, uncertainty produces a variety of responses across sectors, which we define sector-specific irreversibility. In other words, sectoral differences in terms of the ability to substitute a given type of capital with labour, introduce a second-order effect of uncertainty on investment.
Classification National Economy; Financial Planning, Accountancy
Free Keywords Investment; Irreversibility; Uncertainty
Document language English
Publication Year 2010
Page/Pages p. 1797-1809
Journal Applied Economics, 42 (2010) 14
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)