IDEAS home Printed from https://ideas.repec.org/a/fip/fedmqr/y1999ifallp2-13nv.23no.4.html
   My bibliography  Save this article

Maintenance and repair: too big to ignore

Author

Listed:
  • Ellen R. McGrattan
  • James A. Schmitz

Abstract

Most models of aggregate economic activity, like the standard neoclassical growth model, ignore the fact that equipment and structures are maintained and repaired. Once physical capital is purchased in these models, there are typically no more decisions made regarding its use. The theme of this article is that there is evidence to suggest that incorporating expenditures on the maintenance and repair of physical capital into models of aggregate economic activity will change the quantitative answers to some key questions that have been addressed with these models. This evidence is primarily from a little-used economywide survey in Canada. The survey shows that the activity of maintaining and repairing equipment and structures is an activity that is generally both large relative to investment and a substitute for investment to some extent?and to a large extent during some episodes.

Suggested Citation

  • Ellen R. McGrattan & James A. Schmitz, 1999. "Maintenance and repair: too big to ignore," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 23(Fall), pages 2-13.
    • Handle: RePEc:fip:fedmqr:y:1999:i:fall:p:2-13:n:v.23no.4
    as

    Download full text from publisher

    File URL: http://minneapolisfed.org/research/qr/qr2341.pdf
    Download Restriction: no
    File URL: http://minneapolisfed.org/research/qr/qr2341.html
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Rust, John, 1987. "Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher," Econometrica, Econometric Society, vol. 55(5), pages 999-1033, September.
    2. Robert J. Gordon, 1992. "Forward Into the Past: Productivity Retrogression in the Electric Generating Industry," NBER Working Papers 3988, National Bureau of Economic Research, Inc.
    3. Ana M. Aizcorbe & Sharon Kozicki, 1995. "The comovement of output and labor productivity in aggregate data for auto assembly plants," Finance and Economics Discussion Series 95-33, Board of Governors of the Federal Reserve System (U.S.).
    4. Laitner, John, 1995. "Quantitative Evaluations of Efficient Tax Policies for Lucas' Supply Side Models," Oxford Economic Papers, Oxford University Press, vol. 47(3), pages 471-492, July.
    5. Lucas, Robert E, Jr, 1990. "Supply-Side Economics: An Analytical Review," Oxford Economic Papers, Oxford University Press, vol. 42(2), pages 293-316, April.
    6. Goolsbee, Austan, 2004. "Taxes and the quality of capital," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 519-543, March.
    7. Solomon Fabricant, 1938. "Capital Consumption and Adjustment," NBER Books, National Bureau of Economic Research, Inc, number fabr38-1.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Espino, Emilio & González Rozada, Martín, 2013. "Normative Fiscal Policy and Growth: Some Quantitative Implications for the Chilean Economy," IDB Publications (Working Papers) 4648, Inter-American Development Bank.
    2. Thomas I. Renström & Luca Spataro, 2021. "Optimal taxation in an endogenous growth model with variable population and public expenditure," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(4), pages 639-659, August.
    3. John Creedy & Norman Gemmell, 2005. "Publicly financed education in an endogenous growth model," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 32(2), pages 114-131, April.
    4. Strulik, Holger & Trimborn, Timo, 2010. "Anticipated tax reforms and temporary tax cuts: A general equilibrium analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 34(10), pages 2141-2158, October.
    5. Strulik, Holger, 2003. "Capital tax reform, corporate finance, and economic growth and welfare," Journal of Economic Dynamics and Control, Elsevier, vol. 28(3), pages 595-615, December.
    6. Guo, Jang-Ting & Lansing, Kevin J., 1999. "Optimal taxation of capital income with imperfectly competitive product markets," Journal of Economic Dynamics and Control, Elsevier, vol. 23(7), pages 967-995, June.
    7. Michael Ben-Gad, 2017. "The Optimal Taxation Of Asset Income When Government Consumption Is Endogenous: Theory, Estimation And Welfare," Economic Inquiry, Western Economic Association International, vol. 55(4), pages 1689-1711, October.
    8. Temple, Jonathan, 2012. "The calibration of CES production functions," Journal of Macroeconomics, Elsevier, vol. 34(2), pages 294-303.
    9. Irfan Ahmed & Claudio Socci & Francesca Severini & Rosita Pretaroli, 2019. "Fiscal policy for households and public budget constraint in Italy," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 36(1), pages 19-35, April.
    10. Persson, Torsten & Tabellini, Guido, 2002. "Political economics and public finance," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 24, pages 1549-1659, Elsevier.
    11. Vasilev, Aleksandar, 2015. "Welfare gains from the adoption of proportional taxation in a general-equilibrium model with a grey economy: the case of Bulgaria's 2008 flat tax reform," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 48(2), pages 169-185.
    12. Yamaguchi, Shintaro, 2010. "The effect of match quality and specific experience on career decisions and wage growth," Labour Economics, Elsevier, vol. 17(2), pages 407-423, April.
    13. Kemptner, Daniel & Tolan, Songül, 2018. "The role of time preferences in educational decision making," Economics of Education Review, Elsevier, vol. 67(C), pages 25-39.
    14. Michelle Sheran Sylvester, 2007. "The Career and Family Choices of Women: A Dynamic Analysis of Labor Force Participation, Schooling, Marriage and Fertility Decisions," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(3), pages 367-399, July.
    15. Maria Casanova-Rivas, 2008. "Dynamic Complementarities: A Computational and Empirical Analysis of Couples' Retirement Decisions," 2008 Meeting Papers 1073, Society for Economic Dynamics.
    16. Jeremy T. Fox, 2010. "Estimating the Employer Switching Costs and Wage Responses of Forward-Looking Engineers," Journal of Labor Economics, University of Chicago Press, vol. 28(2), pages 357-412, April.
    17. Babur De los Santos & Sergei Koulayev, 2017. "Optimizing Click-Through in Online Rankings with Endogenous Search Refinement," Marketing Science, INFORMS, vol. 36(4), pages 542-564, July.
    18. Andreas Lanz & Gregor Reich & Ole Wilms, 2022. "Adaptive grids for the estimation of dynamic models," Quantitative Marketing and Economics (QME), Springer, vol. 20(2), pages 179-238, June.
    19. Volker Grossmann & Johannes Schünemann & Holger Strulik, 2024. "Fair Pension Policies with Occupation-Specific Ageing," The Economic Journal, Royal Economic Society, vol. 134(663), pages 2835-2875.
    20. Suguru Otani, 2024. "Industry Dynamics with Cartels: The Case of the Container Shipping Industry," Discussion Paper Series DP2024-28, Research Institute for Economics & Business Administration, Kobe University.

    More about this item

    Keywords

    Econometric models;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedmqr:y:1999:i:fall:p:2-13:n:v.23no.4. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kate Hansel (email available below). General contact details of provider: https://edirc.repec.org/data/cfrbmus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.