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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. 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.
  2. 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.
  3. Acemoglu, Daron, 2012. "Introduction to economic growth," Journal of Economic Theory, Elsevier, Elsevier, vol. 147(2), pages 545-550.
  4. Kredler, Matthias, 2014. "Vintage human capital and learning curves," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 40(C), pages 154-178.
  5. repec:hal:journl:halshs-00786419 is not listed on IDEAS

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