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Investment in Greek manufacturing under irreversibility and uncertainty: the message in used capital expenditures

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Abstract:

This article contributes to the existing literature by showing that uncertainty produces a nonuniform 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.

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/00036840701736040

Affiliations: Department of Economics, University of Patras, Rio University Campus, 26504 Patras, Greece

Publication date: May 1, 2010

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