Maintenance Costs, Obsolescence, and Endogenous Growth
AbstractWe analyze the impact of obsolescence of economic inventions by incorporating maintenance costsin the endogenous growth model of expanding product varieties. This contrasts with the existingliterature, which ignores maintenance costs and uses the model of quality improvements todescribe obsolescence. If the maintenance costs become too high, the operating profits becomenegative and the firm stops producing the variety. This diminishes the life span of innovations,thus reducing the return on investment in research and development and the growth rate of theeconomy.
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Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 01-060/2.
Date of creation: 19 Jun 2001
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endogenous growth; obsolescence; maintenance; innovation; variety;
Find related papers by JEL classification:
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
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