Endogeneous Depreciation in a Putty-Putty Production Model

F. Javier Escriba Perez and J. Ramon Ruiz Tamarit
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F. Javier Escriba Perez: Universitat de València
J. Ramon Ruiz Tamarit: UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics
Authors registered in the RePEc Author Service: José Ramón Ruiz-Tamarit

No 1994023, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: The theory of investment has shown the existence of a well defined investment function combining both the tradition of Tobin’s q models and the adjustment costs related to investment. Nevertheless, depreciation is still determined exogenously as a constant proportion of capital stock. In this paper we analyse conditions for a well defined depreciation function. Introducing a maintenance cost function for capital in the firm’s behavior model, depreciation appears as a control variable endogenously determined by the firm.

Pages: 11
Date: 1994-07-01
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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvir:1994023

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