Investment, replacement and scrapping in a vintage capital model with embodied technological change

George C. Bitros (), Natali Hritonenko and Yuri Yatsenko

MPRA Paper from University Library of Munich, Germany

Abstract: This paper analyzes and compares two alternative policies of determining the service life and replacement demand for vintage equipment under embodied technological change. The policies are the infinite-horizon replacement and the transitory replacement ending with scrapping. The corresponding vintage capital models are formulated in the dynamic optimization framework. These two approaches lead to different estimates of the duration of replacements and the impact of technological change on the equipment service life.

Keywords: vintage capital equipment; embodied technological change; service life; replacement; scrapping (search for similar items in EconPapers)
JEL-codes: O33 O16 E22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec and nep-ino
Date: 2007-06

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Persistent link: http://EconPapers.repec.org/RePEc:pra:mprapa:3619

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