When should firms invest in old capital?
This paper studies optimal investment policies when the production function depends on capital of various vintages. In such an environment it is natural to ask whether the firm will invest in old-vintage capital at all. In this paper I derive such a condition. Predictably, investment in old capital takes place if the elasticity of substitution between old and new capital is low, and when the depreciation of capital is high. But other parameters such as the rates of technological progress and depreciation matter as well.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 5 (2009)
Issue (Month): 1 ()
|Contact details of provider:|| Web page: http://www.blackwellpublishing.com/journal.asp?ref=1742-7355|
|Order Information:||Web: http://www.blackwellpublishing.com/subs.asp?ref=1742-7355|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Boldrin, Michele & Levine, David, 2002.
"Factor Saving Innovation,"
CEPR Discussion Papers
3262, C.E.P.R. Discussion Papers.
- Evsey D. Domar, 1963. "Total Productivity and the Quality of Capital," Journal of Political Economy, University of Chicago Press, vol. 71, pages 586.
- Cooper, Russell & Haltiwanger, John, 1993.
"The Aggregate Implications of Machine Replacement: Theory and Evidence,"
American Economic Review,
American Economic Association, vol. 83(3), pages 360-82, June.
- John Haltiwanger & Russell Cooper, 1992. "The Aggregate Implications Of Machine Replacement: Theory And Evidence," Working Papers 92-12, Center for Economic Studies, U.S. Census Bureau.
- Russell Cooper & John Haltiwanger, 1990. "The Aggregate Implications of Machine Replacement: Theory and Evidence," NBER Working Papers 3552, National Bureau of Economic Research, Inc.
- Per Krusell & Lee E. Ohanian & Jose-Victor Rios-Rull & Giovanni L. Violante, 1997.
"Capital-skill complementarity and inequality: a macroeconomic analysis,"
239, Federal Reserve Bank of Minneapolis.
- Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
- Jovanovic, B., 1998.
"Vintage Capital and Equality,"
98-16, C.V. Starr Center for Applied Economics, New York University.
- Boyan Jovanovic, 1998.
"Vintage Capital and Inequality,"
NBER Working Papers
6416, National Bureau of Economic Research, Inc.
- Gort, M. & Greenwood, J. & Rupert, P., 1998.
"Measuring the Rate of Technological Progress in Structures,"
RCER Working Papers
457, University of Rochester - Center for Economic Research (RCER).
- Michael Gort & Jeremy Greenwood & Peter Rupert, 1999. "Measuring the Rate of Technological Progress in Structures," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(1), pages 207-230, January.
- Michael Gort & Jeremy Greenwood & Peter Rupert, 1998. "Measuring the rate of technological progress in structures," Working Paper 9806, Federal Reserve Bank of Cleveland.
- Diego Comin & Bart Hobijn, 2010.
"An Exploration of Technology Diffusion,"
American Economic Review,
American Economic Association, vol. 100(5), pages 2031-59, December.
- Michele Boldrin & David K. Levine, 1999.
"Growth Cycles and Market Crashes,"
Levine's Working Paper Archive
2028, David K. Levine.
- Aruga, Osamu, 2007. "Conventional or New? Optimal Investment Allocation across Vintages of Technology," MPRA Paper 6043, University Library of Munich, Germany.
- Jovanovic, Boyan & Nyarko, Yaw, 1996.
"Learning by Doing and the Choice of Technology,"
Econometric Society, vol. 64(6), pages 1299-1310, November.
- Boyan Jovanovic & Yaw Nyarko, 1994. "Learning By Doing and the Choice of Technology," NBER Working Papers 4739, National Bureau of Economic Research, Inc.
- Jovanovic, B. & Nyarko, Y., 1996. "Learning by Doing and the Choice of Technology," Working Papers 96-25, C.V. Starr Center for Applied Economics, New York University.
- Diego Comin & Bart Hobijn, 2003.
"Cross-country technology adoption: making the theories face the facts,"
169, Federal Reserve Bank of New York.
- Comin, D. & Hobijn, B., 2004. "Cross-country technology adoption: making the theories face the facts," Journal of Monetary Economics, Elsevier, vol. 51(1), pages 39-83, January.
- Comin, D. & Hobijn, B., 2003. "Cross-Country Technology Adoption: Making the Theories Face the Facts," Working Papers 03-04, C.V. Starr Center for Applied Economics, New York University.
- Kredler, Matthias, 2008.
"Experience vs. Obsolescence: A Vintage-Human-Capital Model,"
10200, University Library of Munich, Germany.
- Matthias Kredler, 2010. "Experience vs. Obsolescence: A Vintage-Human-Capital Model," 2010 Meeting Papers 369, Society for Economic Dynamics.
- Boyan Jovanovic & Peter L. Rousseau, 2002.
"Mergers as Reallocation,"
NBER Working Papers
9279, National Bureau of Economic Research, Inc.
- Jerome Adda & Russell Cooper, 1997.
"Balladurette and Juppette: A Discrete Analysis of Scrapping Subsidies,"
0076, Boston University - Industry Studies Programme.
- Jerome Adda & Russell Cooper, 2000. "Balladurette and Juppette: A Discrete Analysis of Scrapping Subsidies," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 778-806, August.
- Adda, Jérôme & Cooper, Russell W., 1997. "Balladurette and jupette: a discrete analysis of scrapping subsidies," CEPREMAP Working Papers (Couverture Orange) 9711, CEPREMAP.
- Jerome Adda & Russell Cooper, 1997. "Balladurette and Juppette: A Discrete Analysis of Scrapping Subsidies," NBER Working Papers 6048, National Bureau of Economic Research, Inc.
- Koeniger Winfried & Licandro Omar, 2006. "On the Use of Substitutability as a Measure of Competition," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(1), pages 1-9, March.
- Antonio R. Sampayo & Luis A. Puch & Omar Licandro, 2006. "Secondhand market and the lifetime of durable goods," Working Papers 2006-10, FEDEA.
- Dmitriy Stolyarov, 2002. "Turnover of Used Durables in a Stationary Equilibrium: Are Older Goods Traded More?," Journal of Political Economy, University of Chicago Press, vol. 110(6), pages 1390-1413, December.
- repec:fth:starer:9816 is not listed on IDEAS
- Hyeok Jeong & Yong Kim, 2006. "Complementarity and Transition to Modern Economic Growth," IEPR Working Papers 06.44, Institute of Economic Policy Research (IEPR).
- Hulten, Charles R. & Wykoff, Frank C., 1981. "The estimation of economic depreciation using vintage asset prices : An application of the Box-Cox power transformation," Journal of Econometrics, Elsevier, vol. 15(3), pages 367-396, April.
When requesting a correction, please mention this item's handle: RePEc:bla:ijethy:v:5:y:2009:i:1:p:107-123. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.