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Publication Date:
September 2006
ISSN:
1935-1690
DOI:
10.2202/1534-6005.1376

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Abraham, Arpad / Carceles-Poveda , Eva / Cavalcanti, Tiago / Kambourov, Gueorgui / Lambertini, Luisa / Ruhl, Kim / Tavares, Jose

The B.E. Journal of Macroeconomics

1 Issue per year

IMPACT FACTOR 2011: 0.321

 

Capital Maintenance versus Technology Adoption Under Embodied Technical Progress

Raouf Boucekkine1 / Blanca Martínez2 / Cagri Saglam3

1CORE and Department of Economics, Université catholique de Louvain, Belgium, boucekkine@core.ucl.ac.be

2University of Alicante, Spain, morgana@merlin.fae.ua.es

3Bilkent University, Turkey, csaglam@bilkent.edu.tr

Citation Information: Contributions in Macroeconomics. Volume 6, Issue 1, Pages 1–33, ISSN (Online) 1534-6005, DOI: 10.2202/1534-6005.1376, September 2006

Publication History:
Published Online:
2006-09-21

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.

Keywords: technology adoption; maintenance; vintage capital; dynamics

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