Investment in vintage capital

Boyan Jovanovic, Yuri Yatsenko

    Research output: Contribution to journalArticle

    Abstract

    We study an economy in which firms use labor and various vintages of capital in a CES production function for the final good. We explicitly solve for the investment in capital of a given vintage as a function of its age, and for the resulting stocks of capital. We show that for reasonable parameter values, inverted-U-shaped dynamics of investment and S-shaped dynamics for capital arise in equilibrium. We view the model as an explanation of intra-firm adoption lags, i.e., the observation that firms adopt innovations over time and not instantaneously.

    Original languageEnglish (US)
    Pages (from-to)551-569
    Number of pages19
    JournalJournal of Economic Theory
    Volume147
    Issue number2
    DOIs
    StatePublished - Mar 2012

    Fingerprint

    Vintage capital
    Inverted-U
    Innovation
    Labor
    CES production function
    Lag

    Keywords

    • CES function
    • General equilibrium
    • Intra-firm adoption lags
    • Optimal control
    • Technological change
    • Vintage capital models

    ASJC Scopus subject areas

    • Economics and Econometrics

    Cite this

    Investment in vintage capital. / Jovanovic, Boyan; Yatsenko, Yuri.

    In: Journal of Economic Theory, Vol. 147, No. 2, 03.2012, p. 551-569.

    Research output: Contribution to journalArticle

    Jovanovic, B & Yatsenko, Y 2012, 'Investment in vintage capital', Journal of Economic Theory, vol. 147, no. 2, pp. 551-569. https://doi.org/10.1016/j.jet.2010.10.017
    Jovanovic, Boyan ; Yatsenko, Yuri. / Investment in vintage capital. In: Journal of Economic Theory. 2012 ; Vol. 147, No. 2. pp. 551-569.
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