Technological progress obsolescence and depreciation
AbstractWe construct a vintage capital model `a la Whelan (2002) with both exogenous embodied and disembodied technical progress, and variable utilization of each vintage. The lifetime of capital goods is endogenous and it relies on the associated maintenance costs. We study the properties of the balanced growth paths. First, we show that the lifetime of capital is an increasing (resp. decreasing) function of the rate of disembodied (resp. embodied) technical progress. Second, we show that both the use-related depreciation rate and the scrapping rate increase when embodied technical progress accelerates. However, the latter drops when disembodied technical progress accelerates while the former remains unaffected. A key feature of our model is that the age-related depreciation rate does depend on the obsolescence rate in sharp contrast to the neoclassical model.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2006027.
Date of creation: 00 Mar 2006
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vintage capital; operation costs; embodied technical progress; age- related depreciation; obsolescence;
Other versions of this item:
- Raouf Boucekkine & Fernando del Río & Blanca Martínez, 2009. "Technological progress, obsolescence, and depreciation," Oxford Economic Papers, Oxford University Press, vol. 61(3), pages 440-466, July.
- Boucekkine, Raouf, 2009. "Technological progress, obsolescence, and depreciation," Open Access publications from UniversitÃ© catholique de Louvain info:hdl:2078.1/23290, Université catholique de Louvain.
- Raouf, BOUCEKKINE & Fernando, DEL RIO & Blanca, MARTINEZ, 2006. "Technological Progress, Obsolescence and Depreciation," Discussion Papers (ECON - DÃ©partement des Sciences Economiques) 2006015, Université catholique de Louvain, Département des Sciences Economiques.
- E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
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