The empirical identification of non-linearities in investment relies on how investment is assumed to be separated into various regimes. Using German establishment-level panel data, we estimate a two-regime model of replacement and expansion investment which allows us to observe regime...

The empirical identification of non-linearities in investment relies on how investment is assumed to be separated into various regimes. Using German establishment-level panel data, we estimate a two-regime model of replacement and expansion investment which allows us to observe regime...

We estimate a model of homogeneous capital investment with two installation possibilities - replacement and expansion using observations at the establishment level. We find that regime switches identified by "ad hoc" measures of lumpy investment do not adequately distinguish expansionary from...