Investment, replacement and scrapping in a vintage capital model with embodied technological change
AbstractThis paper analyzes and compares two alternative policies of determining the service life and replacement demand for vintage equipment under embodied technological change. The policies are the infinite-horizon replacement and the transitory replacement ending with scrapping. The corresponding vintage capital models are formulated in the dynamic optimization framework. These two approaches lead to different estimates of the duration of replacements and the impact of technological change on the equipment service life.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 3619.
Date of creation: Jun 2007
Date of revision:
vintage capital equipment; embodied technological change; service life; replacement; scrapping;
Find related papers by JEL classification:
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-06-23 (All new papers)
- NEP-BEC-2007-06-23 (Business Economics)
- NEP-INO-2007-06-23 (Innovation)
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- Antoine Bonleu & Gilbert Cette & Guillaume Horny, 2011.
"Capital Utilisation and Retirement,"
- Bitros, George C., 2009. "The Theorem of Proportionality in Mainstream Capital Theory: An Assessment of its Conceptual Foundations," MPRA Paper 17436, University Library of Munich, Germany.
- George Bitros, 2010. "The theorem of proportionality in contemporary capital theory: An assessment of its conceptual foundations," The Review of Austrian Economics, Springer, vol. 23(4), pages 367-401, December.
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