Endogenous capital depreciation and technology shocks

Abstract

I examine the dynamic impact of capital maintenance on key aggregates through the depreciation rate. I …nd that two factors are crucial for the short-run e¤ects of Total Factor Productivity and Investment-Speci…c shocks: i) the marginal e¢ ciency of maintenance and its connection with the rate of utilization, and ii) the interplay between the intertemporal e¤ect of maintenance and the substitution e¤ect between maintenance and utilization. The latter is expressed by the relative size of the elasticity of maintenance to the Hicksian elasticity of complementarity between maintenance and utilization. These theoretical results suggest that to match the observed responses of the macroeconomic aggregates the sign of the cross derivative should be negative and that the relative size of the Hicksian elasticity should be smaller than the maintenance elasticity of marginal depreciation. Finally, the model suggests that the main macroeconomic aggregates react procyclically, with the exception of maintenance, the behavior of which depends on the type of the shock.

Depreciation Policy And Ways To Improve It For Updating Industry' Fixed Assets

“…The problem of attracting investment in basic industries to increase the pace of development is traditionally one of the most relevant and widely discussed in the world economic literature (see, for example, the works of Deli (2016), Samaniego and Sun (2019), de Rassenfosse and Jaffe (2018), and other authors). The peculiarities of the current state of the economies of many large countries, associated with the actions of a number of negative global factors, such as a decrease in economic activity as a result of the viral pandemic, sanctions and other non-market restrictions, and increasing strategic uncertainties, have increased the importance of searching for sources of funds necessary to restore and increase economic growth.…”