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Endogenous Growth, Capital Utilization and Depreciation

  • J. AZNAR-MARQUEZ

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and Universitat de Valencia (Spain))

  • J.R. RUIZ-TAMARIT

    (Universitat de Valencia (Spain))

We study the one sector model of growth when a linear production technology is combined with adjustment costs and a technology for capital maintenance. Agents are allowed to under-use the installed capital and to vary the depreciation rate. This economy decides endogenously how much resources devotes to the accumulation of new capital and how much to maintenance and repair activities. We find as striking results that the long-run depreciation and capital utilization rates are positively related to the population growth rate, and that both depend negatively on the initial conditions. The long-run growth rate appears positively correlated with the depreciation rate.

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Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2001037.

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Length: 30
Date of creation: 01 Dec 2001
Date of revision:
Handle: RePEc:ctl:louvir:2001037
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  1. Omar Licandro & Luis A. Puch & J. Ramón Ruiz Tamaritz, 2001. "Optimal Growth under Endogeneous Depreciation, Capital Utilization and Maintenance Costs," Documentos de Trabajo del ICAE 0101, Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico.
  2. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  3. BOUCEKKINE, Raouf & RUIZ-TAMARIT, Ramon, . "Capital maintenance and investment: complements or substitutes?," CORE Discussion Papers RP 1630, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Barro, Robert J. & Sala-i-Martin, Xavier, 1992. "Public Finance in Models of Economic Growth," CEPR Discussion Papers 630, C.E.P.R. Discussion Papers.
  5. Craig Burnside & Martin Eichenbaum, 1994. "Factor Hoarding and the Propagation of Business Cycles Shocks," NBER Working Papers 4675, National Bureau of Economic Research, Inc.
  6. J. R. Ruiz-Tamarit & M. Ventura-Marco, . "Solution to Non-Linear MHDS arising from Optimal Growth Problems," Working Papers 2000-16, FEDEA.
  7. Stephen L. Parente & Edward C. Prescott, 1993. "Changes in the wealth of nations," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 3-16.
  8. Ellen R. McGrattan & James A. Schmitz, 1999. "Maintenance and repair: too big to ignore," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 2-13.
  9. Beatriz Rumbos & Leonardo Auernheimer, 2001. "Endogenous capital utilization in a neoclassical growth model," Atlantic Economic Journal, International Atlantic Economic Society, vol. 29(2), pages 121-134, June.
  10. Epstein, L. & Denny, M., 1980. "Endogenous capital utilization in a short-run production model : Theory and an empiral application," Journal of Econometrics, Elsevier, vol. 12(2), pages 189-207, February.
  11. Rebelo, Sergio, 1991. "Long-Run Policy Analysis and Long-Run Growth," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 500-521, June.
  12. repec:adr:anecst:y:2000:i:58:p:06 is not listed on IDEAS
  13. Andrew B. Abel & Olivier J. Blanchard, 1982. "An Intertemporal Model of Saving and Investment," NBER Working Papers 0885, National Bureau of Economic Research, Inc.
  14. Motahar, Eshragh, 1992. "Endogenous capital utilization and the q theory of investment," Economics Letters, Elsevier, vol. 40(1), pages 71-75, September.
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