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Obsolescence and modernization in the growth process

Listed author(s):
  • Boucekkine, Raouf
  • del Rio, Fernando
  • Licandro, Omar

In this paper, an endogenous growth model is built up incorporating Schumpeterian growth and embodied technological progress. Under embodiment, long run growth is affected by the following effects : (i) obsolescence costs add to the user cost of capital, reducing the research effort; and (ii) the modernization of capital through investment raises the incentives to undertake R&D activities. Applied to the understanding of the growth enhancing role of both capital and R&D subsidies, we conclude that the positive effect of modernization generally more than compensate the negative effect of obsolescence

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Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 77 (2005)
Issue (Month): 1 (June)
Pages: 153-171

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Handle: RePEc:eee:deveco:v:77:y:2005:i:1:p:153-171
Contact details of provider: Web page: http://www.elsevier.com/locate/devec

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  1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
  2. Raouf BOUCEKKINE & Fernando DEL RIO & Omar LICANDRO, 2002. "Embodied technological change learning-by-doing and the productivity slowdown," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2002028, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  3. Robert J. Barro, 2012. "Inflation and Economic Growth," CEMA Working Papers 568, China Economics and Management Academy, Central University of Finance and Economics.
  4. Aghion, P. & Howitt, P., 1990. "A Model Of Growth Through Creative Destruction," DELTA Working Papers 90-12, DELTA (Ecole normale supérieure).
  5. Omar Licandro & Jorge Durán & Javier Ruiz-Castillo, "undated". "The Measurement of Growth under Embodied Technical Change," Working Papers 2001-09, FEDEA.
  6. Raouf Boucekkine & Marc Germain & Omar Licandro, "undated". "Replacement echoes in the vintage capital growth model," Working Papers 96-16, FEDEA.
  7. J. Bradford De Long & Lawrence H. Summers, "undated". "Equipment Investment and Economic Growth," J. Bradford De Long's Working Papers _122, University of California at Berkeley, Economics Department.
  8. Bardhan, Pranab & Priale, Rodrigo, 1996. "Endogenous Growth Theory in a Vintage Capital Model," Center for International and Development Economics Research, Working Paper Series qt1363t4jg, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
  9. Wolff, Edward N, 1991. "Capital Formation and Productivity Convergence over the Long Term," American Economic Review, American Economic Association, vol. 81(3), pages 565-579, June.
  10. R. M. Solow & J. Tobin & C. C. von Weizsäcker & M. Yaari, 1966. "Neoclassical Growth with Fixed Factor Proportions," Review of Economic Studies, Oxford University Press, vol. 33(2), pages 79-115.
  11. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
  12. Hercowitz, Zvi, 1998. "The 'embodiment' controversy: A review essay," Journal of Monetary Economics, Elsevier, vol. 41(1), pages 217-224, February.
  13. Krusell, Per, 1998. "Investment-Specific R&D and the Decline in the Relative Price of Capital," Journal of Economic Growth, Springer, vol. 3(2), pages 131-141, June.
  14. Greenwood, J. & Hercowitz, Z. & Krusell, P., 1996. "Long-Run Implications of Investment-Specific Technological Change," RCER Working Papers 420, University of Rochester - Center for Economic Research (RCER).
  15. Hsieh, Chang-Tai, 2001. "Endogenous growth and obsolescence," Journal of Development Economics, Elsevier, vol. 66(1), pages 153-171, October.
  16. Howitt, Peter & Aghion, Philippe, 1998. "Capital Accumulation and Innovation as Complementary Factors in Long-Run Growth," Journal of Economic Growth, Springer, vol. 3(2), pages 111-130, June.
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