Hostname: page-component-78c5997874-m6dg7 Total loading time: 0 Render date: 2024-11-10T16:01:10.214Z Has data issue: false hasContentIssue false
  • English
  • Français

Q Investment Models, Factor Complementarity and Monopolistic Competition

Published online by Cambridge University Press:  17 August 2016

Omar Licandro
Omar Licandro*
Affiliation:
Universidad Carlos III de Madrid
Get access

Summary

The observed fact that firms invest even if capacities are not fully employed does not fit into most standard formalizations of optimal firm behaviour. In this paper, the q investment approach is adapted to an imperfect competitive economy where the representative firm is assumed to face demand uncertainty. Nominal rigidities and short-run factor complementarity are imposed as sufficient conditions to allow for the coexistence of investment and excess capacity. Since capacities are underemployed, marginal q is shown to diverge from average q. Finally, excess capacity subsists at steady state being more than a short-run phenomena.

Résumé

Résumé

La plupart des modèles standard de comportement optimal pour les firmes ne permettent pas de tenir compte du fait (observé) que les firmes investissent même si leurs capacités sont sous-utilisées. Dans cet article, le modèle d’investissement q est adapté à une économie en concurrence imparfaite, où la firme représentative est confronté à une demande incertaine. On impose des rigidités nominales et une complémentarité à court terme des facteurs comme conditions suffisantes pour que coexistent investissement et capacités excédentaires. On montre alors que, puisque les capacités sont sous-employées, le q marginal diffère du q moyen. Enfin, l’excès de capacités n’est pas qu’un phénomène de court terme mais subsiste à l’équilibre de long terme.

Keywords

023522023522
Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 58 , Issue 1 , 1992 , pp. 51 - 73
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1992 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

(*)

I thank Ch. Arnsperger, D. de la Croix, Ph. De Villé, J. Drèze, J.P. Lambert, P. Malgrange and H. Sneessens for helpful conversations. They should not be held responsible for any mistakes. This paper is part of the IRES Research Program. Financial support of the Fonds de Développement Scientifique of the Université Catholique de Louvain is gratefully acknowledged.

References

REFERENCES

Abel, Andrew and Blanchard, Olivier (1983), An Intertemporal Model of Saving and Investment, Econometrica, 51, pp. 675–692.Google Scholar
Akerlof, George and Yellen, Janet (1985), A Near-Rational Model of the Business Cycle with Wage and Price Inertia, Quarterly Journal of Economics, supplement 100, pp. 823–838.Google Scholar
Blanchard, Olivier and Kiyotaki, Nobu (1987), Monopolistic Competition and the Effects of Aggregate Demand, American Economic Review, 77, 4, pp. 647–666.Google Scholar
d’Autume, Antoine (1988), La Dynamique du Chômage Mixte, in Essais en l’Honneur d’Edmond Malinvaud, Economica, Paris.Google Scholar
Dixit, Avinash and Stiglitz, Joseph (1977). Monopolistic Competition and Optimum Product Diversity, American Economic Review, 67, 3, pp. 297–308.Google Scholar
Drèze, Jacques and Bean, Charles (1990), European Unemployment Lessons from a Multicountry Econometric Study, Scandinavian Journal of Economics, 92, pp. 136–165.Google Scholar
Hayashi, Fumio (1982), Tobin’s Marginal q and Average q : A Neoclassical Interpretation, Econometrica, 50, pp. 213–224.Google Scholar
Jorgenson, Dale (1963), Capital Theory and Investment Behavior, American Economic Review, 53, pp. 247–256.Google Scholar
Lambert, Jean Paul (1988), Disequilibrium Macroeconomic Models: Theory and Estimation of Rationing Models Using Business Survey Data, Cambridge UP.Google Scholar
Licandro, Omar (1990), Investment and the Stock Market in Quantity Rationing Models. Ph.D. Thesis, Catholic University of Lou vain.Google Scholar
Licandro, Omar (1992), Investment Dynamics and Capacity Utilization under Monopolistic Competition. Annales d’Economie et de Statistique, (forthcoming).Google Scholar
Malinvaud, Edmond (1980), Profitability and Unemployment, Cambridge University Press and Edition de la Maison des Sciences de l’Homme.Google Scholar
Malinvaud, Edmond (1987), Capital Productif, Incertitudes et Profitabilité, Annales d’Economie et de Statistique, 5, pp. 1–36.Google Scholar
Malinvaud, Edmond (1989), Profitability and Factor Demands under Uncertainty, De Economist, 137, pp. 2–15.Google Scholar
Mankiw, Gregory (1985), Small Menu Costs and Large Business Cycles: A Macroeconomic Model of Monopoly, Quarterly Journal of Economics, 100, pp. 529–539.Google Scholar
Muellbauer, John (1978), Macrotheory vs. Macroeconometrics : the Treatment of ‘Disequilibrium’ in Macromodels, Department of Economics, University of London, D.P. 59.Google Scholar
Pindyck, Robert and Rotemberg, Julio (1983), Dynamic Factor Demands and the Effects of Energy Price Shocks, American Economic Review, 73, 5, pp. 1066–1079.Google Scholar
Precious, Mark (1987), Rational Expectations, Non-Market Clearing and Investment Theory, Basil Blackwell, New York.Google Scholar
Quandt, Richard (1988), The Econometrics of Disequilibrium, Basil Blackwell, New York.Google Scholar
Schiantarelli, Fabio and Georgoutsos, D. (1990), Monopolistic Competition an the Q Theory of Investment, European Economic Review, 34, pp. 1061–1078.Google Scholar
Sneessens, Henri (1987), Investment and the Inflation-Unemployment Trade off in a Macroeconomic Rationing Model with Monopolistic Competition, European Economic Review, 31, pp. 781–315.Google Scholar
Sneessens, Henri and Drèze, Jacques (1986), A Discussion of Belgian Unemployment, Combining Traditional Concepts and Disequilibrium Econometrics. Economica, 53, S89–S119.Google Scholar