Technological innovations, economic renovation, and anticipation effects

  • Hritonenko, Natali
  • Yatsenko, Yuri
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Publication date
November 2010
Publisher
Digital Commons @PVAMU

Abstract

Optimal replacement of a firm\u27s capital is described in the framework of Solow-type vintage capital models. The firm controls the investment into new capital and scrapping of obsolete capital. The embodied technological change involves a continuous component and technological innovations (breakthroughs, technology shocks). The provided analytic and numeric investigation reveals the qualitative structure of optimal regimes. It demonstrates that the optimal investment is zero immediately before and after a technological breakthrough (direct anticipation effect) and contains a set of zero-investment boundary intervals (anticipation echoes) before the breakthrough time. The optimal capital lifetime oscillates around an interior balanced grow...

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