Optimal Growth under Endogeneous Depreciation, Capital Utilization and Maintenance Costs

Omar Licandro (), Luis Puch and J. Ramón Ruiz Tamaritz
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J. Ramón Ruiz Tamaritz: Universidad de Valencia
Authors registered in the RePEc Author Service: José Ramón Ruiz-Tamarit

No 101, Documentos de Trabajo del ICAE from Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico

Abstract: This paper analyzes the equilibrium dynamics of an optimal growth model that incorporates endogenous depreciation, variable capital utilization, and expenditures on the maintenance of physical capital. Maintenance acts as a substitute for investment, since it reduces the depreciation of capital. Investment is subject to adjustment costs, and capital is not fully utilized, the degree of capital utilization affecting the activity of maintaining. We establish a set of sufficient conditions for the existence and uniqueness of a steady state equilibrium. Also, we define a “delta golden rule” consistent with the proposed economic environment and we analyze the dynamic efficiency of this economy. Finally, the steady state is found locally saddle-path stable. These results provide a framework for the analysis of comparative dynamics in general equilibrium with these features.

Keywords: Maintenance; Depreciation; Capital Utilization; Optimal growth.; Capital y gastos de mantenimiento; Depreciación endógena (search for similar items in EconPapers)
JEL-codes: D90 E22 O40 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2001
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Journal Article: Optimal growth under endogenous depreciation, capital utilization and maintenance costs (2001)
Working Paper: Optimal Growth under Endogenous Depreciation, Capital Utilization and Maintenance Costs
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