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Convergence in neoclassical vintage capital growth models

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Abstract

Most growth models assume capital is homogeneous. This contradicts intuition and empirical evidence that the majority of technology is embodied in the capital stock. Classic papers from the late 1950's and 1960's show that non-optimization models display the same asymptotic growth rates whether technology is embodied (vintage capital) or disembodied. This paper uses new numerical optimization techniques to solve for the entire time paths of the key economic variables for optimization versions of the three main types of vintage capital models. The conclusion is that although steady state growth rates may be the same, the transition paths, especially as characterized by convergence rates, vary greatly between the vintage and non-vintage capital models.

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  • Brett D. Berger, 2001. "Convergence in neoclassical vintage capital growth models," International Finance Discussion Papers 713, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgif:713
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    Cited by:

    1. Brett D. Berger, 2002. "Finding numerical results to large scale economic models using path-following algorithms: a vintage capital example," International Finance Discussion Papers 728, Board of Governors of the Federal Reserve System (U.S.).

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    Productivity; Technology; Econometric models;
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