Convergence in neoclassical vintage capital growth models
AbstractMost growth models assume capital is homogeneous. This contradicts intuition and empirical evidence that the majority of technology is embodied in the capital stock. Classic papers from the late 1950's and 1960's show that non-optimization models display the same asymptotic growth rates whether technology is embodied (vintage capital) or disembodied. This paper uses new numerical optimization techniques to solve for the entire time paths of the key economic variables for optimization versions of the three main types of vintage capital models. The conclusion is that although steady state growth rates may be the same, the transition paths, especially as characterized by convergence rates, vary greatly between the vintage and non-vintage capital models.
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Bibliographic InfoPaper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 713.
Date of creation: 2001
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-02-10 (All new papers)
- NEP-DEV-2002-02-15 (Development)
- NEP-PKE-2002-02-15 (Post Keynesian Economics)
- NEP-TID-2002-02-15 (Technology & Industrial Dynamics)
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