Machine Replacement, Technology Adoption and Convergence

Raouf Boucekkine () and Blanca Martinez ()

No 1999025, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: In this paper, we introduce adoption costs in a canonical vintage capital model. Adoption costs take the form of a direct loss in production during a fixed period of time. We explicitly characterize the optimal machine replacement policy as a function of the adoption period. Using an explicit numerical method, we study the dynamics of the model. In particular, we find that while an increase in the adoption costs lowers the long run level of output, it also rises the magnitude of short run fluctuations and decreases the convergence speed to the steady states.

Keywords: Machine replacement; Technology adoption; Optimal scrapping; Fluctuations; Convergence (search for similar items in EconPapers)
JEL-codes: C63 E22 E32 O40 (search for similar items in EconPapers)
Pages: 9
Date: 1999-12-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvir:1999025

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