Discussion Paper
The replacement problem
Abstract: We construct a vintage capital model of economic growth in which the decision to replace old technologies with new ones is modeled explicitly. Depreciation in this environment is an economic, not a physical concept. We describe the balanced growth paths and the transitional dynamics of this economy. We illustrate the importance of vintage capital by analyzing the response of the economy to fiscal policies designed to stimulate investment in new technologies.
Keywords: Economic development;
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Bibliographic Information
Provider: Federal Reserve Bank of Minneapolis
Part of Series: Discussion Paper / Institute for Empirical Macroeconomics
Publication Date: 1994
Number: 95