TECHNOLOGICAL PROGRESS AND DEPRECIATION

Raouf Boucekkine, Blanca Martinez and Fernando del Rio ()

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: We construct a vintage capital à la Whelan (2002) with both exogenous embodied and disembodied technical progress, and variable utilization of each vintage. The lifetime of capital goods is endogenous and it relies on the associated operation costs. Within this model, we identify the rate of age-related depreciation and the rate of scrapping. We study the properties of the balanced growth paths of the model. First, we show that the lifetime of capital is an increasing (resp. decreasing) function of the rate of disembodied (resp. embodied) technical progress. Second, we show that both the age-related depreciation rate and the scrapping rate increase when embodied technical progress accelerates. In contrast, the latter drops when disembodied technical progress accelerates while the former remains unaffected.

Keywords: Vintage capital; operation costs; embodied technical progress; age-related depreciation; obsolescence (search for similar items in EconPapers)
JEL-codes: E22 E32 O40 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2005-06
New Economics Papers: this item is included in nep-dev, nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:2005-22

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