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A theory of maintenance expenditures tested on automobile data from Greece

Author

Listed:
  • Bitros, George C.

Abstract

This paper derives a model of irregular or unplanned maintenance and repair outlays from an analytical framework based on rational economic behavior in which maintenance, utilization and service life decisions are appropriately integrated and estimates it with the help of data from 433 automobiles imported into Greece from various countries. On the theoretical plain it is shown that the model allows endogenously for most of the variables that have been identified in the relevant literature as important determinants of such expenditures. Also the model yields sharp sign predictions for the included variables and by doing so it sheds considerable light on several issues of theory and applied research in this area. On the empirical plain it is found that: a) there are two behavioral clusters of automobile owners, i.e. one that recommends pooling of the corresponding country data and another that suggests separate estimation of the model at the country level; b) as expected, the reported amounts of these outlays are related positively to the automobile’s age, intensity of utilization, and road accidents, and c) even though the expenditures under consideration for Japanese made cars appear to be relatively more sensitive to road accidents than those of automobiles from all other countries, at least in the years of the sample and on this basis, they offered the best value for the money.

Suggested Citation

  • Bitros, George C., 2016. "A theory of maintenance expenditures tested on automobile data from Greece," MPRA Paper 70820, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:70820
    as

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    File URL: https://mpra.ub.uni-muenchen.de/70820/1/MPRA_paper_70820.pdf
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    References listed on IDEAS

    as
    1. Bitros, G.C. & Flytzanis, E.G., 2001. "Towards A General Theory of Real Capital," Athens University of Economics and Business 126, Athens University of Economics and Business, Department of International and European Economic Studies.
    2. Boucekkine, Raouf & Germain, Marc & Licandro, Omar & Magnus, Alphonse, 1998. "Creative Destruction, Investment Volatility, and the Average Age of Capital," Journal of Economic Growth, Springer, vol. 3(4), pages 361-384, December.
    3. George C. Bitros, 2008. "The Optimal Lifetime Of Assets Under Uncertainty In The Rate Of Embodied Technical Change," Metroeconomica, Wiley Blackwell, vol. 59(2), pages 173-188, May.
    4. Omar Licandro & Luis A. Puch, 2000. "Capital Utilization, Maintenance Costs and the Business Cycle," Annals of Economics and Statistics, GENES, issue 58, pages 143-164.
    5. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July.
    6. Omar Licandro & Luis A. Puch & J. Ramón Ruiz-Tamarit, 2001. "Optimal growth under endogenous depreciation, capital utilization and maintenance costs," Investigaciones Economicas, Fundación SEPI, vol. 25(3), pages 543-559, September.
    7. George Bitros, 2008. "Why the structure of capital and the useful lives of its components matter: A test based on a model of Austrian descent," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 21(4), pages 301-328, December.
    8. Bitros, George C, 1976. "A Statistical Theory of Expenditures in Capital Maintenance and Repair," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 917-936, October.
    9. Boucekkine, Raouf & Pommeret, Aude, 2004. "Energy saving technical progress and optimal capital stock: the role of embodiment," Economic Modelling, Elsevier, vol. 21(3), pages 429-444, May.
    10. Richard Arnott & Russell Davidson & David Pines, 1983. "Housing Quality, Maintenance and Rehabilitation," Review of Economic Studies, Oxford University Press, vol. 50(3), pages 467-494.
    11. Smith, V Kerry & Cowing, Thomas G, 1977. " Further Analysis of Optimal Repair, Scrappage and Investment Policy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 79(3), pages 354-360.
    12. Hartl, Richard, 1983. "Optimal maintenance and production rates for a machine : A nonlinear economic control problem," Journal of Economic Dynamics and Control, Elsevier, vol. 6(1), pages 281-306, September.
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    16. Collard, Fabrice & Kollintzas, Tryphon, 2000. "Maintenance, Utilization, and Depreciation along the Business Cycle," CEPR Discussion Papers 2477, C.E.P.R. Discussion Papers.
    17. Badi H. Baltagi & James M. Griffin & Weiwen Xiong, 2000. "To Pool Or Not To Pool: Homogeneous Versus Hetergeneous Estimations Applied to Cigarette Demand," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 117-126, February.
    18. Karplus, Valerie J. & Paltsev, Sergey & Babiker, Mustafa & Reilly, John M., 2013. "Applying engineering and fleet detail to represent passenger vehicle transport in a computable general equilibrium model," Economic Modelling, Elsevier, vol. 30(C), pages 295-305.
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    More about this item

    Keywords

    maintenance and repair expenditures; utilization; service life; road accidents;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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