Investment Behavior in the United States Textile Industry

Abstract

Investment behavior in the United States textile industry in the postwar period was examined. In addition to the influence of liquidity restraints, the two main components of investment—investment for expansion and investment for replacement or modernization—were considered. Both cross-section and time series data were utilized. The results for time series data confirmed the hypothesis that capital-labor substitution was an important determinant of investment. Result for both cross-section and time series analyses indicated that depreciation expense, either by itself or in conjunc tion with cash flow, had a significant influence on investment. The importance of liquidity constraints indicates that government policies affecting the availability of funds to the textile industry are likely to have a significant im pact on investment decisions.

Keywords

Liquidity restraints expansion replacement modernization: Cross-section data time series data profit model sales model. Capital-labor substitution depreciation expense cash flow government policies. Textile industry investment.

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