Vintage capital,market structure and productivity in an evolutionary model of industry growth |
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Authors: | Herbert L Schuette |
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Institution: | (1) Babcock Graduate School of Management, Wake Forest University, Reynolda Station, P.O. Box 7659, 27109 Winston-Salem, NC, USA |
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Abstract: | This paper examines the effects of inter-firm variation in vintage equipment replacement policies on industry productivity and structure using an evolutionary model based on Nelson-Winter. Traditional industry productivity measures assume a graduated replacement policy with low variation across firms in the average age of the capital stock. This approach allows for inter-firm policy variation. The first part reviews the neoclassical treatment of vintage capital investment; the second part outlines an evolutionary model of vintage replacement in the context of industry growth; and the third part presents results of simulation experiments focused on the relationship between vintage replacement patterns and industry productivity growth. Findings suggest that inter-firm differences in vintage capital investment policies may account for significant shifts in the rates of industry productivity growth and changes in market structure. |
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Keywords: | Evolutionary model Vintage capital Productivity Simulation Market structure |
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