Investment-Specific R&D and the Decline in the Relative Price of Capital
The relative price of capital has declined at a rapid rate in the postwar period. This article provides a candidate explanation for this relative price decline--research and development that are embodied in new, more efficient investment goods. The model mimics the secular aspects of the data, and it has the property that the long-run growth rate of consumption is nontrivially determined as a function of the R and D efforts. Because growth is driven by investment in durable goods in the present model, it seems natural to assume that R and D is product-specific and that the firms producing these goods are long-lived profit centers that internalize the dynamic gains from R and D. A result of this assumption is that the growth rate in the decentralized economy is too low: the so-called business stealing effects that may cause the equilibrium growth rate to be too high in other models is internalized here in the form of planned obsolescence. Copyright 1998 by Kluwer Academic Publishers
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.
When requesting a correction, please mention this item's handle: RePEc:kap:jecgro:v:3:y:1998:i:2:p:131-41. 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: (Sonal Shukla)or (Rebekah McClure)
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.