The Proportionality Hypothesis in Capital Theory: An Assessment of the Literature

George C. Bitros ()

MPRA Paper from University Library of Munich, Germany

Abstract: It is found that the hypothesis of a constant replacement investment capital stock ratio has several fundamental shortcomings. It conflicts with most of the available theoretical and empirical evidence. It is alien to researchers in other fields of economics and related areas; and, perhaps most importantly, it has restrained progress in economic theory and econometric applications based on more realistic conceptualizations of the time structure of capital. On these grounds it is concluded that its abandonment is long overdue.

Keywords: Capital longevity; replacement; depreciation; maintenance; utilization; obso-lescence (search for similar items in EconPapers)
JEL-codes: E2 E22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2008
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