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Market Conditions and Retirement of Physical Capital: Evidence fron Oil Tankers

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  • Iain Cockburn
  • Murray Frank

Abstract

The endogeneity of capital retirements is studied for the particular case of oil tankers from 1979--1989. A model is estimated to examine the effect of changes in market conditions on the price and scrappage of tankers. Energy price rises had a major impact on the value of ships and on which ships were scrapped. A simple model is able to account for many features of the market. We use the information implicit in second-hand prices to ease the computational burden for the model that is estimated.

Suggested Citation

  • Iain Cockburn & Murray Frank, 1992. "Market Conditions and Retirement of Physical Capital: Evidence fron Oil Tankers," NBER Working Papers 4194, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:4194
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    1. Feldstein, Martin S & Rothschild, Michael, 1974. "Towards an Economic Theory of Replacement Investment," Econometrica, Econometric Society, vol. 42(3), pages 393-423, May.
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    4. Hall, Robert E, 1988. "The Relation between Price and Marginal Cost in U.S. Industry," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 921-947, October.
    5. Zvi Eckstein & Kenneth I. Wolpin, 1989. "The Specification and Estimation of Dynamic Stochastic Discrete Choice Models: A Survey," Journal of Human Resources, University of Wisconsin Press, vol. 24(4), pages 562-598.
    6. Yatchew, Adonis & Griliches, Zvi, 1985. "Specification Error in Probit Models," The Review of Economics and Statistics, MIT Press, vol. 67(1), pages 134-139, February.
    7. Robert E. Hall, 1989. "Invariance Properties of Solow's Productivity Residual," NBER Working Papers 3034, National Bureau of Economic Research, Inc.
    8. Hulten, Charles R. & Wykoff, Frank C., 1981. "The estimation of economic depreciation using vintage asset prices : An application of the Box-Cox power transformation," Journal of Econometrics, Elsevier, vol. 15(3), pages 367-396, April.
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    Cited by:

    1. Antoine Bonleu & Gilbert Cette & Guillaume Horny, 2013. "Capital utilization and retirement," Applied Economics, Taylor & Francis Journals, vol. 45(24), pages 3483-3494, August.
    2. Bernard Chane-Küne & Nanno Mulder, 2000. "Capital Stock and Productivity in French Transport : An International Comparison," Working Papers 2000-18, CEPII research center.
    3. Patrick Musso, 2006. "Capital Obsolescence, Growth Accounting and Total Factor Productivity," Revue de l'OFCE, Presses de Sciences-Po, vol. 97(5), pages 217-233.
    4. Alizadeh, Amir H. & Strandenes, Siri Pettersen & Thanopoulou, Helen, 2016. "Capacity retirement in the dry bulk market: A vessel based logit model," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 92(C), pages 28-42.
    5. Valerie A. Ramey & Matthew D. Shapiro, 2001. "Displaced Capital: A Study of Aerospace Plant Closings," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 958-992, October.

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