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American Economic Review: Vol. 104 No. 2 (February 2014)

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Time to Build and Fluctuations in Bulk Shipping

Article Citation

Kalouptsidi, Myrto. 2014. "Time to Build and Fluctuations in Bulk Shipping." American Economic Review, 104(2): 564-608.

DOI: 10.1257/aer.104.2.564

Abstract

This paper explores the nature of fluctuations in world bulk shipping by quantifying the impact of time to build and demand uncertainty on investment and prices. We examine the impact of both construction lags and their lengthening in periods of high investment activity, by constructing a dynamic model of ship entry and exit. A rich dataset of secondhand ship sales allows for a new estimation strategy: resale prices provide direct information on value functions and allow their nonparametric estimation. We find that moving from time-varying to constant to no time to build reduces prices, while significantly increasing both the level and volatility of investment.

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Online Appendix (326.05 KB) | Download Data Set (121.65 KB) | Author Disclosure Statement(s) (2.32 KB)

Authors

Kalouptsidi, Myrto (Princeton U)

JEL Classifications

G31: Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
L11: Production, Pricing, and Market Structure; Size Distribution of Firms
L62: Automobiles; Other Transportation Equipment
L92: Railroads and Other Surface Transportation


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