Machine Replacement, Technology Adoption and Convergence

IRES Working Paper No. 9925

10 Pages Posted: 24 Feb 2001

See all articles by Raouf Boucekkine

Raouf Boucekkine

Universite Catholique de Louvain

Blanca Martinez

Universite Catholique de Louvain

Date Written: 1999

Abstract

In this paper, we introduce adoption costs in a canonical vintage capital model. Adoption costs take the form of a direct loss in production during a fixed period of time. We explicitly characterize the optimal machine replacement policy as a function of the adoption period. Using an explicit numerical method, we study the dynamics of the model. In particular, we find that while an increase in the adoption costs lowers the long run level of output, it also rises the magnitude of short run fluctuations and decreases the convergence speed to the steady states.

JEL Classification: E22, E32, O40, C63

Suggested Citation

Boucekkine, Raouf and Martinez, Blanca, Machine Replacement, Technology Adoption and Convergence (1999). IRES Working Paper No. 9925, Available at SSRN: https://ssrn.com/abstract=216768 or http://dx.doi.org/10.2139/ssrn.216768

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

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