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Optimal growth under endogenous depreciation, capital utilization and maintenance costs

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Licandro, Omar and Puch González, Luis A. and Ruiz Tamarit, J. Ramón (2001) Optimal growth under endogenous depreciation, capital utilization and maintenance costs. [ Documentos de Trabajo del Instituto Complutense de Análisis Económico (ICAE); nº 01, 2001, ] (Unpublished)

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Official URL: http://eprints.ucm.es/6785/


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Abstract

This paper analyzes the equilibrium dynamics of an optimal growth model that incorporates endogenous depreciation, variable capital utilization, and expenditures on the maintenance of physical capital. Maintenance acts as a substitute for investment, since it reduces the depreciation of capital. Investment is subject to adjustment costs, and capital is not fully utilized, the degree of capital utilization affecting the activity of maintaining. We establish a set of sufficient conditions for the existence and uniqueness of a steady state equilibrium. Also, we define a “delta golden rule” consistent with the proposed economic environment and we analyze the dynamic efficiency of this economy. Finally, the steady state is found locally saddle-path stable. These results provide a framework for the analysis of comparative dynamics in general equilibrium with these features.

Resumen (otros idiomas)

Se analiza la dinámica de un modelo de crecimiento que incorpora depreciación endógena, utilización variable del capital y gastos de mantenimiento. La actividad de mantenimiento actúa en cierta medida como sustituto de la inversión puesto que reduce la depreciación de capital.

Item Type:Working Paper or Technical Report
Additional Information:

JEL classification numbers: O40, E22, D90

Uncontrolled Keywords:Maintenance, Depreciation, Capital Utilization, Optimal growth.
Palabras clave (otros idiomas):Capital y gastos de mantenimiento, Depreciación endógena
Subjects:
Series Name:Documentos de Trabajo del Instituto Complutense de Análisis Económico (ICAE)
Volume:2001
Number:01
ID Code:6785
Deposited On:30 Nov 2007
Last Modified:04 Feb 2016 12:21

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