Wuhan University

This paper extends an otherwise standard one-sector neoclassical growth model by postulating that the depreciation rate of physical capital depends on the agents e¤orts on maintenance and repairs. Speci\u85cally, we introduce endogenous depreciation into the standard optimal growth model via two dif-ferent mechanisms and examine the steady state and the dynamics of the model economy qualitatively and quantitatively. We \u85nd that with plausibel parame-ter values, multiple equilibria and indeterminacy can arise in simply modi\u85ed optimal growth model