Working Papers

Investment, Markup and Capacity Utilization in Tunisia

No.

132

Date

October, 2001

Topic

D. Microeconomics

Using data from the Tunisian private manufacturing sector, a theory-consistent model of the investment behavior is estimated. In this model, investment is entirely profit-driven where the profit variable is decomposed into three components: the markup rate on variable costs, the capacity utilization rate and the discrepancy between the optimal and the actual capital-labor ratios. These three components can be related to the usual three determinants of investment: profitability, pressure of demand and relative factor costs respectively. The interpretation of coefficients and the formulation are however different. The econometric investigation demonstrates a clear and strong statistical relationship between investment expenditures and these three determinants.
Investment, Markup and Capacity Utilization in Tunisia

Research Fellows

Riadh Ben Jelili

Associate Professor, Department of Economics, University of...