Abstract

http://ssrn.com/abstract=1670378
 
 

References (16)



 


 



Capital Maintenance as a Key Development Tool


Raouf Boucekkine


Universite Catholique de Louvain

Blanca Martinez


Universite Catholique de Louvain

Cagri Saglam


Bilkent University


Scottish Journal of Political Economy, Vol. 57, Issue 5, pp. 547-567, November 2010

Abstract:     
We construct optimal growth models where labor resources can be allocated either to production, technology adoption or capital maintenance. We first characterize the balanced growth paths of a benchmark model without maintenance. Then we introduce maintenance activity via the depreciation rate of capital. We characterize the optimal allocation of labor across the three activities. Although maintenance deepens the technological gap by diverting labor resources from adoption, we show that it generally increases the long run output level. Moreover, we find that equilibrium maintenance and adoption efforts respond in opposite directions to policy or technology shocks. Finally, we find that the long-term output response to policy shocks is slightly higher in the presence of maintenance.

Number of Pages in PDF File: 21

Accepted Paper Series





Date posted: September 7, 2010  

Suggested Citation

Boucekkine, Raouf and Martinez, Blanca and Saglam, Cagri, Capital Maintenance as a Key Development Tool. Scottish Journal of Political Economy, Vol. 57, Issue 5, pp. 547-567, November 2010. Available at SSRN: http://ssrn.com/abstract=1670378 or http://dx.doi.org/10.1111/j.1467-9485.2010.00530.x

Contact Information

Raouf Boucekkine (Contact Author)
Universite Catholique de Louvain ( email )
3, Place Montesquieu
Institut de Recherches Economiques et Sociales (IRES)
1348 Louvain-la-Neuve
Belgium
+32 10 47 38 48 (Phone)
+32 10 47 39 45 (Fax)
Blanca Martinez
Universite Catholique de Louvain
3, Place Montesquieu
Institut de Recherches Economiques et Sociales (IRES)
1348 Louvain-la-Neuve
Belgium
Cagri Saglam
Bilkent University ( email )
Bilkent, Ankara 06533
Turkey
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