UCL Discovery
UCL home » Library Services » Electronic resources » UCL Discovery

Essays in understanding investment

Wallis, GE; (2012) Essays in understanding investment. Doctoral thesis , UCL (University College London). Green open access

[thumbnail of GW_Thesis.pdf]
Available under License : See the attached licence file.

Download (1MB)


Business investment accounts for around 10 per cent of GDP, but is one of the most volatile components of demand. Despite a large volume of work developing investment theories and testing them, their empirical performance is generally poor and the effectiveness of tax policy remains unclear. Chapter 1 relaxes the common assumption of capital homogeneity by estimating a Q model with multiple assets. This is done using a detailed establishment level panel. The main findings are: (a) the dataset shows clear evidence of inaction, irreversibility and heterogeneity; (b) the Q model assuming quadratic adjustment costs performs slightly better than in most previous literature; (c) the performance of the Q model is significantly improved when applied asset-by-asset; (d) asset-by-asset estimation avoids autocorrelation problems; and (e) for most asset-by-asset regressions Q is found to be a sufficient statistic. Chapter 2 investigates whether the poor empirical performance of the aggregate Q model can be explained by the exclusion of intangibles. The inclusion of intangibles improves the empirical performance of the Q model in a number of ways: (a) estimated adjustment costs are lower; (b) explanatory power is greater; (c) predictive power and parameter stability is improved; and (d) average q remains significant in a Q model with intangibles that has additional regressors but not in a standard Q model. Chapter 3 considers whether tax policy can be used to boost the long-run level of investment. The main findings are: (a) tax changes have had large impacts on the user cost of capital; (b) aggregate regressions give estimates of the user cost elasticity in the range -0.14 to -0.27; (c) tax policy can have significant impacts on the long-run level of the capital stock and investment; and (d) a natural experiment approach supports this finding by showing strong impacts of taxation following major reforms.

Type: Thesis (Doctoral)
Title: Essays in understanding investment
Open access status: An open access version is available from UCL Discovery
Language: English
UCL classification: UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/1369637
Downloads since deposit
Download activity - last month
Download activity - last 12 months
Downloads by country - last 12 months

Archive Staff Only

View Item View Item