We introduce labor-force heterogeneity in a neoclassical investment model. In the baseline model, we highlight the fact that labor adjustment costs are higher for high skilled workers than for low skilled workers. The model predicts that the negative hiring-expected return relation should be...

We use a large project-level dataset to estimate the length of the planning period for commercial construction projects in the United States. We find that these time-to-plan lags are long, averaging about 17 months when we aggregate the projects without regard to size and more than 28 months...

When corporate payout is taxed, internal equity (retained earnings) is cheaper than external equity (share issues). High taxes will favor firms who can finance internally. If there are no perfect substitutes for equity finance, payout taxes may thus change the investment behavior of firms. Using...

The neoclassical investment model matches cross-sectional asset prices both in first differences and in levels. With ten book-to-market deciles as the testing portfolios, the investment model largely matches the Tobin's Q spread and the average return spread across the extreme deciles. The...

This paper shows that, with (partial) irreversibility, higher uncertainty reduces the impact effect of demand shocks on investment. Uncertainty increases real option values making firms more cautious when investing or disinvesting. This is confirmed both numerically for a model with a rich mix...

Evidence of the statistical significance of profits in Q regressions remains one of the principal findings in the empirical investment literature. This result is frequently taken to support the view that capital market imperfections are an important element for understanding investment. This...

Our two related goals in this paper are the following: Firstly and mainly, we want to examine the effects of major changes in modelling strategy and econometric methodology, over the past twenty years, on estimation of firm-level investment equations using panel data. Secondly, we try to assess...

In this paper we derive a model of aggregate investment that builds from the lumpy microeconomic behavior of firms facing stochastic fixed adjustment costs. Instead of the standard sharp (S,s) bands, firms' adjustment policies take the form of a probability of adjustment (adjustment hazard) that...

The 90s have witnessed a revival in economists' interest and hope of explaining" aggregate and microeconomic investment behavior. New theories, better econometric" procedures, and more detailed panel data sets are behind this movement. Much of the progress" has occurred at the level of...

When factors of production can be adjusted costlessly, the mix of factors can be considered separately from their scale. We examine factor choice and utilization when investment is irreversible and subject to a fixed cost, so that the capital stock is a quasi-fixed factor that is adjusted...