Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/74276
Authors: 
Himmelberg, Charles
del Boca, Alessandra
Galeotti, Marzio
Rota, Paola
Year of Publication: 
2005
Series/Report no.: 
Nota di Lavoro, Fondazione Eni Enrico Mattei 54.2005
Abstract: 
“Time to build” models of investment expenditures play an important role in many traditional and modern theories of the business cycle, especially for explaining the dynamic propagation of shocks. We estimate the structural parameters of a time-to-build model using firm-level investment data on equipment and structures. For equipment expenditures, we find no evidence of time-to-build effects beyond one period. For structures, by contrast, there is clear evidence of time to build in the range of 2-3 years. The contrast between equipment and structures is intuitively reasonable and consistent with previous results. The estimates for structures also indicate that initial-period expenditures are low, and increase as projects near completion. These results provide empirical support for including “time to plan” effects for investment in structures. More generally, these results suggest a potential source of specification error for Q models of investment and production-based asset pricing models that ignore the time required to plan, build and install new capital.
Subjects: 
Investment expenditures
Panel data
Italian firms
Time to build
JEL: 
D24
G31
C33
C34
Document Type: 
Working Paper

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