Capital Maintenance Vs Technology Adopton under Embodied Technical Progress

Raouf Boucekkine (), Blanca Martinez () and Çağrı Sağlam

No 2006030, Discussion Papers (ECON - Département des Sciences Economiques) from Université catholique de Louvain, Département des Sciences Economiques

Abstract: 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 (search for similar items in EconPapers)
JEL-codes: E22 E32 O40 (search for similar items in EconPapers)
Pages: 40
Date: 2006-06-01
New Economics Papers: this item is included in nep-dge, nep-eff and nep-mac
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Working Paper: Capital maintenance Vs technology adoption under embodied technical progress (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvec:2006030

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