The Allocation of Investment across Vintages of Technology
Tokyo Institute of Technology; Secretariat of Intellectual Property Strategy Headquarters; Government of Japan - Ministry of Education, Culture, Sports, Science and Technology
Feb 14, 2011
This paper proposes a new mechanism that explains continued investment in older-vintage technology which rests on complementarity between long-lived and short-lived vintage-specific capital. The main result is a threshold condition that relates the rate of vintage-specific technological progress (ˆq) to two investment patterns: if ˆq is above the threshold, all investment is allocated to the newest-vintage technology; otherwise, firms direct part of their investment to older-vintage technologies. The evidence supports our model’s empirically testable implications: as ˆq declines, investment is allocated more toward older-vintage technology; and equipment-price changes depend on capital’s heterogeneous rates of depreciation.
Number of Pages in PDF File: 32
Keywords: Vintage Growth, Intangible, Heterogeneous Depreciation, Equipment Prices, Knowledge Accumulation, Capital Heterogeneity
JEL Classification: E22, O30, O47working papers series
Date posted: September 18, 2007 ; Last revised: February 16, 2011
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