Demand Shocks and Firm Investment: Micro-Evidence from Fiscal Retrenchment in Italy
利用意大利特定市政支出削减作为外生需求冲击，发现企业主要通过削减资本而非劳动力来应对，这源于资本投资的不可逆性。
Abstract We study the effect of a persistent demand shock on corporate factor utilisation. Our identification strategy leverages a legislative change designed to permanently reduce spending in certain targeted municipalities. This change generates an arguably exogenous drop in the revenue of procurement firms, which differs depending on each firm’s reliance for its revenue on procurement in the targeted municipalities. We find that firms responded to the demand shock by cutting capital rather than labour. We propose a theoretical mechanism based on the irreversibility of capital investment.