Optimal Capital Accumulation, Energy Cost and the Nature of Technological Progress

Raouf Boucekkine (raouf.boucekkine@univ-amu.fr) and Aude Pommeret (aude.pommeret@univ-smb.fr)

No 2001023, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: This paper derives the optimal pace of capital accumulation at the firm level and the corresponding investment dynamics in the presence of an energy-saving technological progress. Energy and capital are complementary. When technical progress is disembodied, the firm invests once at the first period and never invests again. The optimal capital stock is a decreasing function of the energy price. When technical progress is embodied, the optimal scrapping time of capital goods is constant and investment is periodic. The optimal effective capital stock is shown to be lower than the optimal capital stock under disembodied technical change. A striking outcome of the paper is that under embodiment, the optimal effective capital stock is an increasing function of the energy cost, in contrast to the disembodiment case

Keywords: Investment theory; Embodied technological progress; Energy; Investment dynamics (search for similar items in EconPapers)
JEL-codes: C63 E22 E32 O40 (search for similar items in EconPapers)
Pages: 20
Date: 2000-09-01
New Economics Papers: this item is included in nep-ino and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvir:2001023

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