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Technological Progress and Investment Microeconomic Foundations and Macroeconomic Implications

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  • Bruno de Oliveira Cruz
  • Raouf Boucekkine

Abstract

This paper presents a non-technical overview of the recent investment literature witha special emphasis on the connection between technological progress and theinvestment decision. First of all, we acknowledge that some dramatic advances havebeen made in the 1990s in understanding and modelling non-convex capitaladjustment schemes and irreversibility. Nonetheless, this new literature has notsatisfactorily accounted for the investment-specific (or embodied) nature of technicalprogress. We argue that the recent technological trends have a heavy impact on theway the investment decision is taken and is to be taken. This is turn should imply thereconsideration of many empirical results, and a more careful modelling strategytaking into account the price variables and scrupulously choosing the mostappropriate level of (dis)aggregation.

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Bibliographic Info

Paper provided by Instituto de Pesquisa Econômica Aplicada - IPEA in its series Discussion Papers with number 1170.

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Length: 33 pages
Date of creation: Mar 2006
Date of revision:
Handle: RePEc:ipe:ipetds:1170

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  1. Ricardo J. Caballero & John V. Leahy, 1996. "Fixed Costs: The Demise of Marginal q," Harvard Institute of Economic Research Working Papers 1765, Harvard - Institute of Economic Research.
  2. Jerome Adda & Russell Cooper, 1997. "Balladurette and Juppette: A Discrete Analysis of Scrapping Subsidies," NBER Working Papers 6048, National Bureau of Economic Research, Inc.
  3. Abel, Andrew B, 1985. "A Stochastic Model of Investment, Marginal q and the Market Value of the Firm," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(2), pages 305-22, June.
  4. Karl Whelan, 2002. "Some New Economy Lessons for Macroeconomists," Recherches économiques de Louvain, De Boeck Université, vol. 68(1), pages 21-36.
  5. BOUCEKKINE, Raouf & del RIO, Fernando & LICANDRO, Omar, 2002. "Obsolescence and modernization in the growth process," CORE Discussion Papers 2002067, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. BOUCEKKINE, Raouf & DE LA CROIX, David & LICANDRO, Omar, 2006. "Vintage capital," CORE Discussion Papers 2006024, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Malcomson, James M., 1975. "Replacement and the rental value of capital equipment subject to obsolescence," Journal of Economic Theory, Elsevier, vol. 10(1), pages 24-41, February.
  8. Greenwood, J. & Hercowitz, Z. & Krusell, P., 1995. "Long-Run Implications of Investment-Specific Technological Change," UWO Department of Economics Working Papers 9510, University of Western Ontario, Department of Economics.
  9. Pindyck, Robert S, 1988. "Irreversible Investment, Capacity Choice, and the Value of the Firm," American Economic Review, American Economic Association, vol. 78(5), pages 969-85, December.
  10. John Haltiwanger & Russell Cooper & Laura Power, 1999. "Machine Replacement and the Business Cycle: Lumps and Bumps," American Economic Review, American Economic Association, vol. 89(4), pages 921-946, September.
  11. Omar LICANDRO & Reyes MAROTO & Luis A. PUCH, 2004. "Innovation, investment and productivity: evidence from Spanish firms," Economics Working Papers ECO2004/07, European University Institute.
  12. BOUCEKKINE, Raouf & GERMAIN, Marc & LICANDRO, Omar & MAGNUS, Alphonse, . "Creative destruction, investment volatility, and the average age of capital," CORE Discussion Papers RP -1376, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  13. Abel, Andrew B & Eberly, Janice C, 1994. "A Unified Model of Investment under Uncertainty," American Economic Review, American Economic Association, vol. 84(5), pages 1369-84, December.
  14. Chirinko, Robert S., 1996. "Investment under uncertainty: A review essay," Journal of Economic Dynamics and Control, Elsevier, vol. 20(9-10), pages 1801-1808.
  15. van Hilten, Onno, 1991. "The optimal lifetime of capital equipment," Journal of Economic Theory, Elsevier, vol. 55(2), pages 449-454, December.
  16. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
  17. Hartman, Richard, 1972. "The effects of price and cost uncertainty on investment," Journal of Economic Theory, Elsevier, vol. 5(2), pages 258-266, October.
  18. Abel, Andrew B, 1983. "Optimal Investment under Uncertainty," American Economic Review, American Economic Association, vol. 73(1), pages 228-33, March.
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Cited by:
  1. Luís F. Tironi & Bruno de O. Cruz, 2008. "Inovação Incremental ou Radical: Há Motivos para Diferenciar? Uma Abordagem com Dados da PINTEC," Discussion Papers 1360, Instituto de Pesquisa Econômica Aplicada - IPEA.

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