Embodied technical change in a two-sector AK model

Gabriel J Felbermayr () and Omar Licandro ()

Macroeconomics from EconWPA

Abstract: In this paper, we study a two-sector version of the AK model proposed by Rebelo (1991), where constant returns to capital are confined to the investment goods sector. We show that this setup, an endogenous growth extension to the model of Greenwood, Hercowitz, and Krusell (1997), reproduces important features of the U.S. NIPA data, namely the secular downward trend of the price of equipment investment relative to non- durable consumption and the increasing ratio of real equipment investment to real output. The main difference to the one-sector AK model lies in the existence of obsolescence costs, which decrease output growth if the elasticity of intertemporal substitution is larger than the saving rate.

Keywords: subliminal; extant; Smith; economagic; gmm (search for similar items in EconPapers)
JEL-codes: O41 O30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev and nep-dge
Date: 2002-10-01
Note: Type of Document -
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpma:0210001

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