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The Structure of Technology with Endogenous Capital Utilization


  • Kim, Moshe


A model is presented for the estimation of production technology when capital is endogenously utiliz ed. The present model permits the firm to choose the rate of utilizat ion and level of maintenance applied to its capital equipment such th at the user cost of capital services is minimized. The model is one o f two-stage optimization and estimation. The two stages are integrate d, using duality theory, through the generation of an instrumental us er cost variable in the first stage. The instrumental user cost is th en utilized for the estimation of the aggregate technology. The resul ts are compared to results obtained from standard models with exogeno us capital utilization and the emerging biases are discussed. Copyright 1988 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Kim, Moshe, 1988. "The Structure of Technology with Endogenous Capital Utilization," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(1), pages 111-130, February.
  • Handle: RePEc:ier:iecrev:v:29:y:1988:i:1:p:111-30

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    References listed on IDEAS

    1. Mussa, Michael, 1974. "Tariffs and the Distribution of Income: The Importance of Factor Specificity, Substitutability, and Intensity in the Short and Long Run," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1191-1203, Nov.-Dec..
    2. Russell S. Boyer, 1977. "Commercial Policy under Alternative Exchange Rate Regimes," Canadian Journal of Economics, Canadian Economics Association, vol. 10(2), pages 218-232, May.
    3. Lloyd A. Metzler, 1949. "Tariffs, the Terms of Trade, and the Distribution of National Income," Journal of Political Economy, University of Chicago Press, vol. 57, pages 1-1.
    4. Mussa, Michael, 1974. "A Monetary Approach to Balance-of-Payments Analysis," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 6(3), pages 333-351, August.
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    Cited by:

    1. Doms, Mark E, 1996. "Estimating Capital Efficiency Schedules within Production Functions," Economic Inquiry, Western Economic Association International, vol. 34(1), pages 78-92, January.
    2. George Bitros & Elias Flytzanis, 2004. "Utilization and Maintenance in a Model with Terminal Scrapping," Macroeconomics 0411016, EconWPA.
    3. Bitros, George C. & Flytzanis, Elias, 2009. "Utilization and maintenance in a model with scrapping," European Journal of Operational Research, Elsevier, vol. 194(2), pages 551-573, April.

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