Adoption Costs, Age of Capital and Technological Substitution
In this paper, we introduce adoption costs in a vintage capital model. We assume that the incorporation of technological innovations into the production sector requires an extra labor cost during a fixed period. First, we show how adoption crucially matters in the shape of short run and asymptotic dynamics. Then, we analyze the consequences of adoption costs in technological substitution extending the model in two ways : we let adoption costs depend on the technical growth rate, and we endogenize them, depending on the technological gap. When adoption costs depend on the technical growth rate, the effect of growth on optimal lifetime of machines is indeterminate; the creative destruction effect can be compensated by the adoption effect, and faster growth rates delay the technological substitution. Finally, when adoption costs are endogenous, we recover the typical obsolescence effect in vintage capital models and show that technological progress has a negative effect on the technological gap.
|Date of creation:||01 Jun 2002|
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- Boucekkine, Raouf & Licandro, Omar & Paul, Christopher, 1997.
"Differential-difference equations in economics: On the numerical solution of vintage capital growth models,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 21(2-3), pages 347-362.
- Raouf Boucekkine & Omar Licandro & Christopher Paul, . "Differential-Difference Equations in Economics: On the Numerical Solution of Vintage Capital Growth Models," Computing in Economics and Finance 1996 _036, Society for Computational Economics.
- Jeremy Greenwood & Boyan Jovanovic, 1998.
"Accounting for Growth,"
NBER Working Papers
6647, National Bureau of Economic Research, Inc.
- BOUCEKKINE, Raouf & GERMAIN, Marc & LICANDRO, Omar & MAGNUS, Alphonse, .
"Creative destruction, investment volatility, and the average age of capital,"
CORE Discussion Papers RP
-1376, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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"Welfare aspects of technological adoption with learning,"
154749, Institut National de la Recherche Agronomique, France.
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"Replacement Echoes in the Vintage Capital Growth Model,"
Journal of Economic Theory,
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- Boucekkine, R. & Germain, M. & Licandro, O., . "Replacement echoes in the vintage capital growth model," CORE Discussion Papers RP -1275, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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- Boucekkine, Raouf & Martinez, Blanca, 1999. "Machine Replacement, Technology Adoption and Convergence," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1999025, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- Bahk, Byong-Hong & Gort, Michael, 1993. "Decomposing Learning by Doing in New Plants," Journal of Political Economy, University of Chicago Press, vol. 101(4), pages 561-83, August.
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