Capital Heterogeneity : Does it Matter? Fundamental Q and Investment on a Panel of Italian Firms

Wes tudy the determinantso f firms' investmentd ecisions with heterogeneous-capitalg oods. We exploita panel of small and medium-sizedfirmsw, hicha llows us to distinguishb etweenp urchases and sales of capital goods. Wec onsiders eparatelye quipmenta nd structuresa nd test the hypothesis of convex adjustment costs. We extend the fundamental Q approach to the case of two capital inputs. The results show that the standard convex costs model performs well for equipment but notfor structures. We find evidence of nonconvex adjustment costs in the case of structures.