Investment in vintage capital

Boyan Jovanovic () and Yuri Yatsenko

Journal of Economic Theory, 2012, vol. 147, issue 2, 551-569

Abstract: We study an economy in which firms use labor and various vintages of capital in a CES production function for the final good. We explicitly solve for the investment in capital of a given vintage as a function of its age, and for the resulting stocks of capital. We show that for reasonable parameter values, inverted-U-shaped dynamics of investment and S-shaped dynamics for capital arise in equilibrium. We view the model as an explanation of intra-firm adoption lags, i.e., the observation that firms adopt innovations over time and not instantaneously.

Keywords: Vintage capital models; CES function; General equilibrium; Technological change; Intra-firm adoption lags; Optimal control (search for similar items in EconPapers)
JEL-codes: D24 E22 O32 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (36)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:147:y:2012:i:2:p:551-569

DOI: 10.1016/j.jet.2010.10.017

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