Adoption Costs, Age of Capital and Technological Substitution

Blanca Martinez ()

No 2002024, 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 vintage capital model. We assume that the incorporation of technological innovations into the production sector requires an extra labor cost during a fixed period. First, we show how adoption crucially matters in the shape of short run and asymptotic dynamics. Then, we analyze the consequences of adoption costs in technological substitution extending the model in two ways : we let adoption costs depend on the technical growth rate, and we endogenize them, depending on the technological gap. When adoption costs depend on the technical growth rate, the effect of growth on optimal lifetime of machines is indeterminate; the creative destruction effect can be compensated by the adoption effect, and faster growth rates delay the technological substitution. Finally, when adoption costs are endogenous, we recover the typical obsolescence effect in vintage capital models and show that technological progress has a negative effect on the technological gap.

Keywords: Machine replacement; Optimal scrapping; Economic fluctuations; Technology adoption (search for similar items in EconPapers)
JEL-codes: C63 E22 E32 O40 (search for similar items in EconPapers)
Pages: 30
Date: 2002-06-01
New Economics Papers: this item is included in nep-dev
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://sites.uclouvain.be/econ/DP/IRES/2002-24.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvir:2002024

Access Statistics for this paper

More papers in LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) Place Montesquieu 3, 1348 Louvain-la-Neuve (Belgium). Contact information at EDIRC.
Bibliographic data for series maintained by Virginie LEBLANC ().