A Vintage Model of Supply Applied to French Manufacturing

Abstract

In Kouri, Macedo and Viscio (1982), we applied a vintage model of supply to data from the French manufacturing sector. The model was,however, solved with a particular parametrization (Cobb Douglas production function and a quadratic adjustment function). Also, no fixed factors were allowed for in the theoretical treatment, even though fixed labor was found to be significant in the application to France. The treatment of technological progress was equally restrictive. Here we solve in Section I the general case of N variable factorsand N fixed factors with embodied and disembodied technological progress. It turns out to be simpler than the combination of a Cobb-Douglas production function with a quadratic adjustment function, thus suggesting a manageable framework for the analysis of profitability and employment inindustrial countries. The model is simulated in Section II using previously unavailable data on a subsector of French manufacturing froci 1959 to 1980. The empirical results confirm the importance of vintage effects.