The replacement problem |
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| Authors: | Thomas F Cooley Jeremy Greenwood Mehmet Yorukoglu |
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| Institution: | aWilliam E. Simon Graduate School of Business Administration and Department of Economics, University of Rochester, Rochester, NY 14627, USA;bDepartment of Economics, University of Rochester, Rochester, NY 14627, USA;cDepartment of Economics, University of Chicago, Chicago, IL 60637, USA |
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| Abstract: | A prototypical vintage capital model of economic growth is developed, where the decision to replace old technologies with new ones is modeled explicitly. Technological change is investment specific. Depreciation in this environment is an economic, not a physical, concept. The vintage capital economy's balanced-growth paths and transitional dynamics are analyzed. The transitional dynamics are markedly different from the standard neoclassical growth model. |
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| Keywords: | Investment-specific technological change Vintage capital Economic growth |
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