In this paper we look at the behavior of physical depreciation over the business cycle. We do so within the context of a real business cycle model where the decisions of firms about physical capital utilization, maintenance, improvement and scrapping are endogenous. The model encompasses the baseline real business cycle model, where the depreciation rate (d) is fixed. It also encompasses a version of the GReenwood, Hercowitz and Huffman (1988) model of endogenous physical capital utilization, while it shares features with the Burnside, Eichenbaum and Rebelo (1993) variable work effort model.
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Paper provided by Athens University of Economics and Business, Department of International and European Economic Studies in its series Athens University of Economics and Business with number
93.
Length: 21 pages Date of creation: 1998 Date of revision: Handle: RePEc:fth:athebu:93
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