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Another look at the linear q model: an empirical analysis of aggregate business capital spending with maintenance expenditures

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  • Sarantis Kalyvitis
Abstract
The paper revisits the empirical investment literature, which has established that aggregate business fixed investment is not found to be related linearly to marginal or average Tobin's q. The theoretical background is extended here by developing a supply‐side model where the depreciation rate of private capital is determined endogenously. The firm can either invest in ‘new’ capital, which adds directly to the existing capital stock at the presence of convex adjustment costs, or extend the durability of installed capital through maintenance expenditure, which affects its depreciation rate. The model shows that Tobin's q is then a positively related sufficient statistic for both components of aggregate capital expenditures. This central implication is tested empirically using aggregate time‐series survey data from Canada on ‘new’ investment and maintenance expenditures covering the period 1956–93. The estimated relationships produce significant and plausible parameter estimates for the structural parameters of the q model. Le texte examine la littérature empirique sur l'investissement qui a établi que le niveau d'investissement agrégé des entreprises en capital fixe n'est pas relié de façon linéaire au coefficient moyen ou marginal q de Tobin. On enrichit l'arrière plan théorique en développant un modèle d'offre dans lequel le taux de dépréciation du capital privé est déterminé de façon endogène. L'entreprise peut soit investir dans du capital ≪nouveau ≫ (ce qui ajoute directement au stock de capital existant) soit allonger la vie du capital en place par des dépenses de maintenance qui modifient le taux de dépréciation. Le modèle montre que le coefficient q de Tobin est alors positivement relié aux deux composantes des dépenses agrégées en capital. Cette implication importante est mise au test empiriquement en utilisant les séries chronologiques en provenance des enquêtes de Statistiques Canada sur les nouveaux investissements et les dépenses de maintenance pour la période 1956–93. Les relations estimées produisent des paramètres plausibles et significatifs pour les paramètres structurels du modèle q.

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  • Sarantis Kalyvitis, 2006. "Another look at the linear q model: an empirical analysis of aggregate business capital spending with maintenance expenditures," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 39(4), pages 1282-1315, November.
    • Handle: RePEc:wly:canjec:v:39:y:2006:i:4:p:1282-1315
    DOI: 10.1111/j.1540-5982.2006.00390.x
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    References listed on IDEAS

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