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Investment behaviour in Europe : a comparative analysis1

Published online by Cambridge University Press:  17 August 2016

Michel Catinut ,
Richard Cawley ,
Fabienne Ilzkovitz ,
Alexander Italianer  and
Matthias Mors
Michel Catinut
Affiliation:
Commission of the European Communities
Richard Cawley
Affiliation:
Commission of the European Communities
Fabienne Ilzkovitz
Affiliation:
Commission of the European Communities
Alexander Italianer
Affiliation:
Commission of the European Communities
Matthias Mors
Affiliation:
Commission of the European Communities
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Summary

The focus of this article is the comparison of the relative influence of different determinants of investment (demand, the relative price of capital and labour, and profit) for five large European countries and the United States. The investment equations are derived from production functions, either putty-putty or putty-clay, in the context of a disequilibrium model. The comparison of annual and quarterly estimates (after aggregation in a equivalent annual model) improves the evaluation of the precision of the parameter estimates.

In all these countries, in accordance with the accelerator effect, demand is the dominant influence in the short term, fading away in the medium term. In contrast, profit is not a predominant influence except in the medium term. Its role thus seems to result from the effect of expectations on investment profitability rather than from short run self-financing constraints. With respect to factor substitution, the analysis confirms that this is only weakly linked to changes in the relative price of capital and labour.

Résumé

Résumé

Cet article a pour objet de comparer les influences relatives des différents déterminants de l’investissement (demande, prix relatifs capital-travail, profit) pour cinq grands pays européens et pour les Etats-Unis. Les équations d’investissement sont dérivées de fonctions de production, soit putty-putty, soit putty-clay, dans un cadre théorique de déséquilibre. La comparaison des estimations annuelles, d’une part, et trimestrielles, d’autre part, (après agrégation en un modèle annuel équivalent), permet de mieux appréhender la précision d’évaluation des paramètres.

Dans tous les pays, l’influence de la demande est prépondérante à court terme et s’estompe à moyen terme, conformément à l’effet d’accélérateur. En revanche, le profit ne devient prédominant qu’à moyen terme. Son rôle semble donc plutôt résulter de phénomènes d’anticipation sur la rentabilité des investissements que de contraintes d’autofinancement à court terme. Quant à la substitution entre facteurs de production, l’analyse confirme qu’elle n’est généralement que peu liée aux mouvements des prix relatifs capital-travail.

Keywords

122211522122211522
Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 54 , Issue 3 , 1988 , pp. 277 - 324
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 1988 

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Footnotes

1

This paper is an abridged version of a larger report published by the Commission of the European Communities, Directorate-General for Economic and Financial Affairs, in European Economy n° 31 (March 1987) under the title « The determinants of investment ». This report, which contains a number of annexes with more detailed results, is available upon request from the authors.

References

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