TY  - JOUR
AU  - Goolsbee,Austan
AU  - Gross,David B.
TI  - Estimating Adjustment Costs with Data on Heterogeneous Capital Goods
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6342
PY  - 1997
Y2  - December 1997
UR  - http://www.nber.org/papers/w6342
L1  - http://www.nber.org/papers/w6342.pdf
N1  - Author contact info:
Austan Goolsbee
Booth School of Business
University of Chicago
5807 S. Woodlawn Avenue
Chicago, IL 60637
Tel: 773/702-5869
Fax: 773/702-0458
E-Mail: goolsbee@chicagobooth.edu

David Gross
Graduate School of Business
University of Chicago
1101 E. 58th Street
Chicago, IL  60637
Tel: 773-702-7372
E-Mail: DGROSS@LEXECON.COM
AB  - This paper estimates the micro-level costs of adjusting capital using detailed data on" investment decisions in the US airline industry.  The data include the capital stock retirement, market values, operating costs, and utilization rates of 16 different types of capital" goods for each airline.  This data on heterogeneous capital goods allows us to estimate the" desired stock of capital for each type of plane while controlling for unobserved changes in airline" profitability.  The results show clear evidence of non-convex adjustment costs inaction for capital investment and quadratic adjustment costs conditional on positive or negative" investment.  The adjustment costs for utilization show similar non-convexities but with smaller" adjustment costs.  Aggregating to the firm level or using accounting data obscures the non-convexities and biases the estimated adjustment costs upward."
ER  -