Investment Spikes in Dutch Horticulture: An Analysis at Firm and Aggregate Firm Level Over the Period 1975-1999
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An intermittent and lumpy pattern of investments is observed in the Dutch horticulture sector: only 16.5% of firms experience of investment spike, but they account for 67.7% of total investment. The objective of this paper is to examine the impact of time-varying and time-invariant variables on the probability of observing an investment spieke. This paper investigates the spells between investment spikes in a discrete-time proportional hazard framework. Duration models were estimated on two data sets: on an unbalanced panel and on a grouped into 10 groups data of Dutch glasshouse firms over the period 1975-1999. Different specifications of the model were estimated. Theoretically based model can sufficiently explain the occurrence of investment spikes. Both models show a 6- year period of investment spikes that is also confirmed for the average firm which exhibits a higher hazard ratio in the 6th, 12-13th and 19-20th years of duration. The presence of investment cycle can demonstrate the long-run policy of firms in presence of non-convex adjustment costs. The panel-data models are augmented with a Gamma distribution to account for unobserved heterogeneity among firms.