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Investment in vintage capital

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  • Jovanovic, Boyan
  • Yatsenko, Yuri

Abstract

We study an economy in which firms use labor and various vintages of capital in a CES production function for the final good. We explicitly solve for the investment in capital of a given vintage as a function of its age, and for the resulting stocks of capital. We show that for reasonable parameter values, inverted-U-shaped dynamics of investment and S-shaped dynamics for capital arise in equilibrium. We view the model as an explanation of intra-firm adoption lags, i.e., the observation that firms adopt innovations over time and not instantaneously.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 147 (2012)
Issue (Month): 2 ()
Pages: 551-569

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Handle: RePEc:eee:jetheo:v:147:y:2012:i:2:p:551-569

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Web page: http://www.elsevier.com/locate/inca/622869

Related research

Keywords: Vintage capital models; CES function; General equilibrium; Technological change; Intra-firm adoption lags; Optimal control;

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References

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Cited by:
  1. Hippolyte D'Albis & Emmanuelle Augeraud-Véron & Hermen Jan Hupkes, 2013. "Multiple Solutions in Systems of Functional Differential Equations," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00786419, HAL.
  2. Franklin Gamboa & Wilfredo L. Maldonado, 2013. "Feasibility and Optimality of the Initial Capital Stock in the Ramsey Vintage Capital Model," CAMA Working Papers 2013-38, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  3. Acemoglu, Daron, 2012. "Introduction to economic growth," Journal of Economic Theory, Elsevier, vol. 147(2), pages 545-550.
  4. Kredler, Matthias, 2014. "Vintage human capital and learning curves," Journal of Economic Dynamics and Control, Elsevier, vol. 40(C), pages 154-178.
  5. repec:hal:journl:halshs-00786419 is not listed on IDEAS

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