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Technological Progress and Investment Microeconomic Foundations and Macroeconomic Implications

  • Bruno de Oliveira Cruz
  • Raouf Boucekkine

This paper presents a non-technical overview of the recent investment literature witha special emphasis on the connection between technological progress and theinvestment decision. First of all, we acknowledge that some dramatic advances havebeen made in the 1990s in understanding and modelling non-convex capitaladjustment schemes and irreversibility. Nonetheless, this new literature has notsatisfactorily accounted for the investment-specific (or embodied) nature of technicalprogress. We argue that the recent technological trends have a heavy impact on theway the investment decision is taken and is to be taken. This is turn should imply thereconsideration of many empirical results, and a more careful modelling strategytaking into account the price variables and scrupulously choosing the mostappropriate level of (dis)aggregation.

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Paper provided by Instituto de Pesquisa Econômica Aplicada - IPEA in its series Discussion Papers with number 1170.

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Length: 33 pages
Date of creation: Mar 2006
Date of revision:
Handle: RePEc:ipe:ipetds:1170
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  8. Karl Whelan, 2002. "Some new economy lessons for macroeconomists," Open Access publications 10197/216, School of Economics, University College Dublin.
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  16. Boucekkine, Raouf, et al, 1998. " Creative Destruction, Investment Volatility, and the Average Age of Capital," Journal of Economic Growth, Springer, vol. 3(4), pages 361-84, December.
  17. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, volume 1, number 5474.
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