Vintage Capital, Market Structure and Productivity in an Evolutionary Model of Industry Growth

Herbert L Schuette

Journal of Evolutionary Economics, 1994, vol. 4, issue 3, 173-84

Abstract: This paper examines the effects of inter-firm variation in vintage equipment replacement policies on industry productivity and structure using an evolutionary model based on Nelson-Winter. Traditional industry productivity measures assume a graduated replacement policy with low variation across firms in the average age of the capital stock. This approach allows for inter-firm policy variation. The first part reviews the neoclassical treatment of vintage capital investment; the second part outlines an evolutionary model of vintage replacement in the context of industry growth; and the third part presents results of simulation experiments focused on the relationship between vintage replacement patterns and industry productivity growth. Findings suggest that inter-firm differences in vintage capital investment policies may account for significant shifts in the rates of industry productivity growth and changes in market structure.

Date: 1994
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Persistent link: https://EconPapers.repec.org/RePEc:spr:joevec:v:4:y:1994:i:3:p:173-84

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Journal of Evolutionary Economics is currently edited by Uwe Cantner, Elias Dinopoulos, Horst Hanusch and Luigi Orsenigo

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