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Endogeneous Depreciation in a Putty-Putty Production Model

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Listed:
  • Escriba Perez, F. Javier

    (Universitat de València)

  • Ruiz Tamarit, J. Ramon

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics)

Abstract

The theory of investment has shown the existence of a well defined investment function combining both the tradition of Tobin’s q models and the adjustment costs related to investment. Nevertheless, depreciation is still determined exogenously as a constant proportion of capital stock. In this paper we analyse conditions for a well defined depreciation function. Introducing a maintenance cost function for capital in the firm’s behavior model, depreciation appears as a control variable endogenously determined by the firm.

Suggested Citation

  • Escriba Perez, F. Javier & Ruiz Tamarit, J. Ramon, 1994. "Endogeneous Depreciation in a Putty-Putty Production Model," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1994023, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  • Handle: RePEc:ctl:louvir:1994023
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