Empirical vintage models for the Netherlands: A review in outline

Abstract

Since the pioneering article of Attiyeh [1] on an empirical vintage model of production for U.S. manufacturing, research in that field has been undertaken for several other countries as well. For the Netherlands the results of the first attempts to estimate such models were published in 1974 by De Vries [38] followed shortly after by Den Hartog and Tjan [ 12]. In contrast to the approach followed by De Vries the latter two authors stressed the role of real labour costs in determining the life span of equipment and consequently in determining the number of available jobs. The message conveyed by Den Hartog and Tjan was essentially that rising unemployment in the early 1970's ( Fig. 1) was not due to stagnating aggregate demand ( Fig. 2) but to real wage costs growing too fast ( Fig. 3) and investments growing too slow (Fig. 2).Notwithstanding the predominantly Keynesian-flavoured notions of employment policy at the time, the philosophy and implications of the Den HartogTjan paper pervaded that realm remarkably quickly.This and the phenomenon of stagnating employment with growth still prevailing provoked a lively, not to say a heated discussion. Contributions to this discussion came from some 30 authors and included total rejection of the approach, refinements, extensions and amendments of the vintage model and its estimation procedure, the integration of the approach in a more comprehensive model of the economy and an extensive discussion of its policy implications [8],To review this discussion in all detail would require much more than the number of pages intended for this article. Its scope is therefore limited to a treatment of the main issues, In section 1 the work on clay-clay (ex ante complementarity) vintage models will be reviewed, while section 2 is devoted to vintage models assuming ex ante substitutability, Attention will be given to (theoretical) model specifications, empirically inspired adjustments arid empirical results. Estimation procedures and methods can only be hinted at. In conclusion section 3 provides some scanty remarks on the policy implications of vintage models embedded in comprehensive models of the economy as well as a conjecture on the theoretical significance of that approach. *Central Planning Bureau, The Hague, the Netherlands. The author acknowledges the critical remarks of G.M.M. Gelauff and H.IS. Tjan and their help in the construction of Tables 1,2 and 3.

On the diffusion of technologies in a vintage framework : theoretical considerations and empirical results

“…Both arguments are contra a putty-putty approach. The clay-clay approach has the disadvantage that its description of the economy, in particular the demand for labour, is less accurate, as pointed out for instance by Den Hartog (1984). In our opinion, the putty-clay approach is a fruitful compromise between the two.…”