1995 Reports

Plant-Level Adjustment and Aggregate Investment Dynamics

Caballero, Ricardo J.; Engel, Eduardo M. R. A.; Haltiwanger, John C.; Woodford, Michael; Hall, Robert E.

From pages 3-4 -- 'This paper integrates the organizing framework of the aggregation literature and the microeconomic data of the LRD [Longitudinal Research Database]. It organizes data from a large sample of continuously operating plants in the U.S. manufacturing sector for the period 1972-88 (that is very similar to the sample used by Doms and Dunne) in a way that is useful for understanding aggregate investment dynamics. Indeed, the final product is an aggregate investment equation that has aggregate equipment investment on the left-hand side and not only aggregate, but also microeconomic variables on the right-hand side. Throughout the paper we attempt to explain equipment investment.'