Browsing by Subject "Vintage capital"

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Open Access
Capital maintenance versus technology adoption under embodied technical progress
(B E Press, 2006) Boucekkine, R.; Martínez, B.; Saglam, C.
We study an optimal growth model with one-hoss-shay vintage capital, where labor resources can be allocated freely either to production, technology adoption or capital maintenance. Technological progress is partly embodied. Adoption labor increases the level of embodied technical progress. First, we are able to disentangle the amplification-propagation role of maintenance in business fluctuations: in the short run, the response of the model to transitory shocks on total factor productivity in the final good sector are definitely much sharper compared to the counterpart model without maintenance but with the same average depreciation rate. Moreover, the one-hoss shay technology is shown to reinforce this amplification-propagation mechanism. We also find that accelerations in embodied technical progress should be responded by a gradual adoption effort, and capital maintenance should be the preferred instrument in the short run. Copyright © 2006 The Berkeley Electronic Press. All rights reserved.
Open Access
The role of endogenous vintage specific depreciation on the optimal behavior of firms
(Wiley-Blackwell Publishing Ltd., 2008) Saglam, C.; Veliov, V. M.
This paper studies the firms' capital accumulation process in a vintage capital model with embodied technological change. We take into account that depreciation is endogenous and in particular associated with vintage specific maintenance expenditure. We prove that maintenance is a local substitute for investment as soon as the marginal cost of maintenance is strictly increasing. We show that maintenance and investment in new capital goods appear as complements with respect to the changes in productivity, cost of maintenance, fixed cost of operation, efficiency of maintenance services and appear as substitutes with respect to the price of new machines. Allowing for investment in old vintages, we determine that investment in old machines appears as a substitute of both investments in new machines and maintenance services. We end up by analyzing the effects of technological progress on optimal plans and prove that a negative anticipation effect can occur even without any market imperfections.