01695cam a22002297 4500001000600000003000500006005001700011008004100028100002000069245011300089260006600202490004100268500001400309520078200323530006101105538007201166538003601238710004201274830007601316856003701392856003601429w2264NBER20150228190905.0150228s1987 mau||||fs|||| 000 0 eng d1 aHall, Robert E.10aInvestment Under Uncertaintyh[electronic resource]:bTheory and Tests with Industry Data /cRobert E. Hall. aCambridge, Mass.bNational Bureau of Economic Researchc1987.1 aNBER working paper seriesvno. w2264 aMay 1987.3 aUnder the assumption of constant returns to scale, there is a very simple, easily testable condition for optimal investment under uncertainty. Application of the test requires no parametric assumptions about technology and no assumptions about the competitiveness of the output market. The condition is that the expected marginal revenue product of labor equal the expected rental price of capital. The condition implies a certain invariance property for a modified version of Solow's productivity residual. Tests of the invariance property for U.S. industry data give very strong rejection in quite a few industries. The interpretation of rejection is either that the technology has increasing returns (possibly because of fixed costs) or that fins systematically over-invest. aHardcopy version available to institutional subscribers. aSystem requirements: Adobe [Acrobat] Reader required for PDF files. aMode of access: World Wide Web.2 aNational Bureau of Economic Research. 0aWorking Paper Series (National Bureau of Economic Research)vno. w2264.4 uhttp://www.nber.org/papers/w226441uhttp://dx.doi.org/10.3386/w2264