Optimal Growth under Endogeneous Depreciation, Capital Utilization and Maintenance Costs
This paper analyzes the equilibrium dynamics of an optimal growth model that incorporates endogenous depreciation, variable capital utilization, and expenditures on the maintenance of physical capital. Maintenance acts as a substitute for investment, since it reduces the depreciation of capital. Investment is subject to adjustment costs, and capital is not fully utilized, the degree of capital utilization affecting the activity of maintaining. We establish a set of sufficient conditions for the existence and uniqueness of a steady state equilibrium. Also, we define a “delta golden rule” consistent with the proposed economic environment and we analyze the dynamic efficiency of this economy. Finally, the steady state is found locally saddle-path stable. These results provide a framework for the analysis of comparative dynamics in general equilibrium with these features.
|Date of creation:||2001|
|Date of revision:|
|Contact details of provider:|| Phone: +34 913942604|
Web page: https://www.ucm.es/icae
More information through EDIRC
|Order Information:|| Postal: Facultad de Ciencias Económicas y Empresariales. Pabellón prefabricado, 1ª Planta, ala norte. Campus de Somosaguas, 28223 - POZUELO DE ALARCÓN (MADRID)|
Web: https://www.ucm.es/fundamentos-analisis-economico2/documentos-de-trabajo-del-icae Email:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Burnside, Craig & Eichenbaum, Martin, 1996.
"Factor-Hoarding and the Propagation of Business-Cycle Shocks,"
American Economic Review,
American Economic Association, vol. 86(5), pages 1154-74, December.
- Craig Burnside & Martin Eichenbaum, 1994. "Factor Hoarding and the Propagation of Business Cycles Shocks," NBER Working Papers 4675, National Bureau of Economic Research, Inc.
- Epstein, L. & Denny, M., 1980. "Endogenous capital utilization in a short-run production model : Theory and an empiral application," Journal of Econometrics, Elsevier, vol. 12(2), pages 189-207, February.
- Motahar, Eshragh, 1992. "Endogenous capital utilization and the q theory of investment," Economics Letters, Elsevier, vol. 40(1), pages 71-75, September.
- repec:adr:anecst:y:2000:i:58 is not listed on IDEAS
- Collard, Fabrice & Kollintzas, Tryphon, 2000. "Maintenance, Utilization, and Depreciation along the Business Cycle," CEPR Discussion Papers 2477, C.E.P.R. Discussion Papers.
- repec:adr:anecst:y:2000:i:58:p:05 is not listed on IDEAS
- Hirofumi Uzawa, 1964. "Optimal Growth in a Two-Sector Model of Capital Accumulation," Review of Economic Studies, Oxford University Press, vol. 31(1), pages 1-24.
- Puch, Luis A. & Licandro, Omar, 1995.
"Capital utilization: maintenance costs and the business cycle,"
UC3M Working papers. Economics
3917, Universidad Carlos III de Madrid. Departamento de Economía.
- 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.
- Andrew B. Abel & Olivier J. Blanchard, 1982.
"An Intertemporal Model of Saving and Investment,"
NBER Working Papers
0885, National Bureau of Economic Research, Inc.
- Beatriz Rumbos & Leonardo Auernheimer, 2001. "Endogenous capital utilization in a neoclassical growth model," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 29(2), pages 121-134, June.
- M. Kurz, 1968. "The General Instability of a Class of Competitive Growth Processes," Review of Economic Studies, Oxford University Press, vol. 35(2), pages 155-174.
- Ruiz-Tamarit, José Ramon, 1995. "Dépréciation endogène et sous-utilisation du capital," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1995026, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- Ellen R. McGrattan & James A. Schmitz, 1999. "Maintenance and repair: too big to ignore," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 2-13.
When requesting a correction, please mention this item's handle: RePEc:ucm:doicae:0101. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Águeda González Abad)
If references are entirely missing, you can add them using this form.