The Estimation of Investment Functions for Manufacturing Industry in the United Kingdom.

This paper reports on attempts to explain the level of fixed investment in plant and machinery in manufacturing industry in the United Kingdom. Particular emphasis is laid on measuring the impact of various governmental incentive schemes which have been employed over the past decade to stimulate investment.[2] The approach adopted here is to distinguish between the nominal price of an asset as paid by the investor and its effective price after allowing for any applicable allowances. This effective price is then incorporated into the neoclassical investment theory developed and applied by Jorgenson [7], [8].[3] However, the formulation used here differs from that of Jorgenson in that the elasticity of the desired capital stock with respect to relative prices is not assumed to be unitary. [ABSTRACT FROM AUTHOR]