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A Schumpeterian Vintage Capital Model: An Attempt at Synthesis


  • Boucekkine, Raouf

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

  • del Rio, Fernando

    (Universidade de Santiago de Compostela)

  • Licandro, Omar

    (FEDEA, Spain)


In this paper, we build up a general equilibrium model explicitly incorporating Schumpeterian growth à la Aghion and Howitt (1992) and a vintage capital structure in line with Solow (1960). In this set-up, we show that the investment rate is a fundamental determinant of the profitability of R&D. We characterize the balanced growth paths. We show that, although the model can generate multiple equilibria due to the presence of strategic complementarities, the unique stable equilibrium is indeed dominated by strategic substituabilities. At this equilibrium, the higher is the investment rate, the more resources are devoted to R&D, the faster the economy grows, the lower is the average age of capital and the higher is the rate of decline of the relative price of capital. Subsidizing both capital and research stimulates growth. The embodiment of technological progress does not necessarily affect negatively the efficiency of capital subsidy through the typical obsolescence costs because of the modernization effect of investment in such a context.

Suggested Citation

  • Boucekkine, Raouf & del Rio, Fernando & Licandro, Omar, 2000. "A Schumpeterian Vintage Capital Model: An Attempt at Synthesis," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2000023, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  • Handle: RePEc:ctl:louvir:2000023

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    References listed on IDEAS

    1. Bertola, Giuseppe, 1993. "Factor Shares and Savings in Endogenous Growth," American Economic Review, American Economic Association, vol. 83(5), pages 1184-1198, December.
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    8. Chamley, Christophe, 1986. "Optimal Taxation of Capital Income in General Equilibrium with Infinite Lives," Econometrica, Econometric Society, vol. 54(3), pages 607-622, May.
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    12. Ordover, Janusz A., 1976. "Distributive justice and optimal taxation of wages and interest in a growing economy," Journal of Public Economics, Elsevier, vol. 5(1-2), pages 139-160.
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    Cited by:

    1. Boucekkine, Raouf & de la Croix, David, 2003. "Information technologies, embodiment and growth," Journal of Economic Dynamics and Control, Elsevier, vol. 27(11-12), pages 2007-2034, September.
    2. Vincent BODART & Paul REDING, 2001. "Do Foreign Exchange Markets Matter Dor Industry Stock Returns ? An empirical investigation," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2001016, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).

    More about this item


    vintage capital; R&D; creative destruction; embodiment; obsolescence; modernization of capital;

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques


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