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Technology Adoption, Capital Maintenance And The Technological Gap

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  • Raouf Boucekkine

    ()
    (IRES)

  • Blanca Martínez

    (Universidad de Alicante)

  • CARGI SAGLAM

    (IRES)

Abstract

We study optimal growth models à la Nelson and Phelps (1966) where labor resources can be allocated either to production, technology adoption or capital maintenance. We first characterize the balanced growth paths of a benchmark model without maintenance. Then we introduce the maintenance activity via the depreciation rate of capital. We characterize the optimal allocation of labor across the three activities. Though maintenance deepens the technological gap by diverting labor resources from adoption, we show that it generally increases the long run output level. Moreover we find that equilibrium maintenance and adoption efforts respond in opposite directions to policy or technology shocks. When a technological shock occurs, the reduction of the equilibrium technological gap is incompatible with welfare maximization. Finally, we find that the long term output response to policy shocks is slightly higher in the presence of maintenance.

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File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2003-18.pdf
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Bibliographic Info

Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2003-18.

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Length: 29 pages
Date of creation: May 2003
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2003-18

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Keywords: Adoption; Maintenance; Technological gap; Output gap;

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References

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  1. Omar LICANDRO & Luis A. PUCH, 2000. "Capital Utilization, Maintenance Costs and the Business Cycle," Annales d'Economie et de Statistique, ENSAE, issue 58, pages 143-164.
  2. Marga PEETERS & Paul GHIJSEN, 2000. "Capital, Labour, Materials and Additional R&D Investment in Japan - The Issue of Double-Counting," Annales d'Economie et de Statistique, ENSAE, issue 58, pages 165-184.
  3. Ellen R. McGrattan & James A. Schmitz, Jr., 1999. "Maintenance and repair: too big to ignore," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 2-13.
  4. David, Paul A, 1990. "The Dynamo and the Computer: An Historical Perspective on the Modern Productivity Paradox," American Economic Review, American Economic Association, vol. 80(2), pages 355-61, May.
  5. Feldstein, Martin S & Rothschild, Michael, 1974. "Towards an Economic Theory of Replacement Investment," Econometrica, Econometric Society, vol. 42(3), pages 393-423, May.
  6. Richard R. Nelson & Edmond S. Phelps, 1965. "Investment in Humans, Technological Diffusion and Economic Growth," Cowles Foundation Discussion Papers 189, Cowles Foundation for Research in Economics, Yale University.
  7. Blomstrom, Magnus & Kokko, Ari, 1998. " Multinational Corporations and Spillovers," Journal of Economic Surveys, Wiley Blackwell, vol. 12(3), pages 247-77, July.
  8. Collard, Fabrice & Kollintzas, Tryphon, 2000. "Maintenance, Utilization, and Depreciation along the Business Cycle," CEPR Discussion Papers 2477, C.E.P.R. Discussion Papers.
  9. Nickell, Stephen, 1975. "A closer look at replacement investment," Journal of Economic Theory, Elsevier, vol. 10(1), pages 54-88, February.
  10. Kokko, Ari, 1994. "Technology, market characteristics, and spillovers," Journal of Development Economics, Elsevier, vol. 43(2), pages 279-293, April.
  11. Parente, Stephen L & Prescott, Edward C, 1994. "Barriers to Technology Adoption and Development," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 298-321, April.
  12. Michele Cincera & Teoman Pamukçu, 2002. "Analyse des déterminants de l'innovation technologique dans un nouveau pays industrialisé: une étude économétrique sur données d'entreprises dans le secteur manufacturier turc," ULB Institutional Repository 2013/843, ULB -- Universite Libre de Bruxelles.
  13. Tiffen, Mary & Mortimore, Michael, 1994. "Malthus controverted: The role of capital and technology in growth and environment recovery in Kenya," World Development, Elsevier, vol. 22(7), pages 997-1010, July.
  14. Vishwasrao, Sharmila & Bosshardt, William, 2001. "Foreign ownership and technology adoption: evidence from Indian firms," Journal of Development Economics, Elsevier, vol. 65(2), pages 367-387, August.
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Cited by:
  1. Raouf Boucekkine & Blanca Martínez & CARGI SAGLAM, 2003. "The Development Problem Under Embodiment," Working Papers. Serie AD 2003-08, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  2. BOUCEKKINE, Raouf & MARTINEZ, Blanca & SAGLAM, Cagri, 2006. "Capital maintenance Vs technology adoption under embodied technical progress," CORE Discussion Papers 2006058, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Blanca MARTINEZ, 2002. "Technological convergence and the connections between adoption, maintenance and investment activities," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2002025, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).

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