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Vintage Capital, Investment and Growth

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  • Jess Benhabib
  • Aldo Rustichini

Abstract

We study the dynamics of growth and investment in a continuous time model with vintage capital. Vintage capital models may be characterized by non-exponential rates of depreciation and technical change and can incorporate "gestation lags" as well as "learning by doing". We investigate the effect of such features on the dynamics of investment and growth and show how they can contribute to explain the volatile nature of investment time-series.

Suggested Citation

  • Jess Benhabib & Aldo Rustichini, 1990. "Vintage Capital, Investment and Growth," Discussion Papers 886, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  • Handle: RePEc:nwu:cmsems:886
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    References listed on IDEAS

    as
    1. Tapan Mitra & Henry Y. Wan, 1985. "Some Theoretical Results on the Economics of Forestry," Review of Economic Studies, Oxford University Press, vol. 52(2), pages 263-282.
    2. Benhabib, Jess & Rustichini, Aldo, 1989. "A Vintage Capital Model Of Investment And Growth: Theory And Evidence," Working Papers 89-26, C.V. Starr Center for Applied Economics, New York University.
    3. Mitra, Tapan & Wan, Henry Jr., 1986. "On the faustmann solution to the forest management problem," Journal of Economic Theory, Elsevier, vol. 40(2), pages 229-249, December.
    4. McKenzie, Lionel W., 1979. "Optimal Economic Growth and Turnpike Theorems," Working Papers 267, California Institute of Technology, Division of the Humanities and Social Sciences.
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