The Proportionality Hypothesis in Capital Theory: an Assessment of the Literature
It is found that the hypothesis of a constant replacement investment capital stock ratio has several fundamental shortcomings. It conflicts with most of the available theoretical and empirical evidence. It is alien to researchers in other fields of economics and related areas; and, perhaps most importantly, it has restrained progress in economic theory and econometric applications based on more realistic conceptualizations of the time structure of capital. On these grounds it is concluded that its abandonment is long overdue..
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.:
- repec:dgr:rugsom:96a09 is not listed on IDEAS
- Rust, John, 1987. "Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher," Econometrica, Econometric Society, vol. 55(5), pages 999-1033, September.
- Cooper, Russell & Haltiwanger, John, 1993.
"The Aggregate Implications of Machine Replacement: Theory and Evidence,"
American Economic Review,
American Economic Association, vol. 83(3), pages 360-382, June.
- Russell Cooper & John Haltiwanger, 1990. "The Aggregate Implications of Machine Replacement: Theory and Evidence," NBER Working Papers 3552, National Bureau of Economic Research, Inc.
- 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.
- Bitros, George C. & Hritonenko, Natali & Yatsenko, Yuri, 2007. "Investment, replacement and scrapping in a vintage capital model with embodied technological change," MPRA Paper 3619, University Library of Munich, Germany.
- Bitros, George C., 2008. "Aggregation of Producer Durables with Exogenous Technical Change and Endogenous Useful lives," MPRA Paper 8243, University Library of Munich, Germany.
- Ian M. Dobbs, 2004. "Replacement Investment: Optimal Economic Life Under Uncertainty," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 31(5-6), pages 729-757.
- Hartman, Joseph C., 2004. "Multiple asset replacement analysis under variable utilization and stochastic demand," European Journal of Operational Research, Elsevier, vol. 159(1), pages 145-165, November.
- Barro, Robert J, 1972. "Monopoly and Contrived Depreciation," Journal of Political Economy, University of Chicago Press, vol. 80(3), pages 598-602, May-June.
- Barro, Robert J., 1972. "Monopoly and Contrived Depreciation," Scholarly Articles 3451394, Harvard University Department of Economics.
- 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.
- Chatterjee, Santanu, 2005. "Capital utilization, economic growth and convergence," Journal of Economic Dynamics and Control, Elsevier, vol. 29(12), pages 2093-2124, December.
- Santanu Chatterjee, 2003. "Capital Utilization, Economic Growth and Convergence," Computing in Economics and Finance 2003 41, Society for Computational Economics.
- repec:adr:anecst:y:2000:i:58:p:05 is not listed on IDEAS
- Austan Goolsbee, 1998. "The Business Cycle, Financial Performance, and the Retirement of Capital Goods," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(2), pages 474-496, April.
- Austan Goolsbee, 1998. "The Business Cycle, Financial Performance, and the Retirement of Capital Goods," NBER Working Papers 6392, National Bureau of Economic Research, Inc.
- George C. Bitros, 2008. "The Optimal Lifetime Of Assets Under Uncertainty In The Rate Of Embodied Technical Change," Metroeconomica, Wiley Blackwell, vol. 59(2), pages 173-188, 05.
- Bitros, George C., 2007. "The optimal lifetime of assets under uncertainty in the rate of embodied technical change," MPRA Paper 3620, University Library of Munich, Germany.
- Richard Schmalensee, 1974. "Market Structure, Durability, and Maintenance Effort," Review of Economic Studies, Oxford University Press, vol. 41(2), pages 277-287.
- Barnhart, Scott W. & Miller, Edward M., 1990. "Problems in the estimation of equations containing perpetual inventory measured capital," Journal of Macroeconomics, Elsevier, vol. 12(4), pages 637-651.
- Parks, Richard W, 1974. "The Demand and Supply of Durable Goods and Durability," American Economic Review, American Economic Association, vol. 64(1), pages 37-55, March.
- Eisner, Robert, 1972. "Components of Capital Expenditures: Replacement and Modernization Versus Expansion," The Review of Economics and Statistics, MIT Press, vol. 54(3), pages 297-305, August.
- Fraser, Jane M. & Posey, Jack W., 1989. "A framework for replacement analysis," European Journal of Operational Research, Elsevier, vol. 40(1), pages 43-57, May.
- Boersma, Jacques S.K.Th. & Stegwee, Robert A., 1996. "Exploring the issues in knowledge management," Research Report 96A09, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
- Dale W. Jorgenson, 1966. "The Embodiment Hypothesis," Journal of Political Economy, University of Chicago Press, vol. 74, pages 1-1.
- Omar Licandro & Luis A. Puch, 2000. "Capital Utilization, Maintenance Costs and the Business Cycle," Annals of Economics and Statistics, GENES, issue 58, pages 143-164.
- Puch, Luis A. & Licandro, Omar, 1995. "Capital utilization: maintenance costs and the business cycle," UC3M Working papers. Economics 3917, Universidad Carlos III de Madrid. Departamento de Economía.
- Nickell, Stephen, 1975. "A closer look at replacement investment," Journal of Economic Theory, Elsevier, vol. 10(1), pages 54-88, February.
- Kinokuni, Hiroshi, 1999. "Repair Market Structure, Product Durability, and Monopoly," Australian Economic Papers, Wiley Blackwell, vol. 38(4), pages 343-353, December.
- Feldstein, Martin S & Foot, David K, 1971. "The Other Half of Gross Investment: Replacement and Modernization Expenditures," The Review of Economics and Statistics, MIT Press, vol. 53(1), pages 49-58, February.
- Swan, Peter L, 1977. "Product Durability under Monopoly and Competition: Comment," Econometrica, Econometric Society, vol. 45(1), pages 229-235, January.
- Morton I. Kamien & Nancy L. Schwartz, 1971. "Optimal Maintenance and Sale Age for a Machine Subject to Failure," Management Science, INFORMS, vol. 17(8), pages 495-504, April.
- Bitros, George C, 1976. "A Statistical Theory of Expenditures in Capital Maintenance and Repair," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 917-936, October.
- repec:adr:anecst:y:2000:i:58 is not listed on IDEAS
- Parks, Richard W, 1979. "Durability, Maintenance and the Price of Used Assets," Economic Inquiry, Western Economic Association International, vol. 17(2), pages 197-217, April.
- Gerald L. Thompson, 1968. "Optimal Maintenance Policy and Sale Date of a Machine," Management Science, INFORMS, vol. 14(9), pages 543-550, May.
- Vernon L. Smith, 1957. "Economic Equipment Policies: An Evaluation," Management Science, INFORMS, vol. 4(1), pages 20-37, October.
- Winston, Gordon C, 1974. "The Theory of Capital Utilization and Idleness," Journal of Economic Literature, American Economic Association, vol. 12(4), pages 1301-1320, December.
- Rust, John, 1986. "When Is It Optimal to Kill Off the Market for Used Durable Goods?," Econometrica, Econometric Society, vol. 54(1), pages 65-86, January.
- Jeremy Bulow, 1986. "An Economic Theory of Planned Obsolescence," The Quarterly Journal of Economics, Oxford University Press, vol. 101(4), pages 729-749.
- Michael Waldman, 1993. "A New Perspective on Planned Obsolescence," The Quarterly Journal of Economics, Oxford University Press, vol. 108(1), pages 273-283.
- Mann, Duncan P., 1992. "Durable goods monopoly and maintenance," International Journal of Industrial Organization, Elsevier, vol. 10(1), pages 65-79, March.
- Jorgenson, Dale W., 1966. "The Embodiment Hypothesis," Scholarly Articles 3403063, Harvard University Department of Economics. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:dug:journl:y:2011:i:27:p:27-39. 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: (Florian Nuta)
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.