Detecting Propagation Effects by Observing Aggregate Distributions: The Case of Lumpy Investments

By using an extensive panel data set of Italian firms, we show empirically that the fraction of firms that engage in a lumpy investment follows a non-normal, double-exponential distribution across region-year. We propose a simple sectoral model that generates the double-exponential distribution that arises from the complementarity of the firms’ lumpy investments within a region. We calibrate the degree of complementarity by estimating an individual firm’s behavior with ∗Corresponding author, E-mail: [email protected], Phone: +81-42-580-8417, Fax: +81-42-5808410.