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International Finance Discussion Papers
The International Finance Discussion Papers logo links to the International Finance Discussion Papers home page Convergence in Neoclassical Vintage Capital Growth Models
Brett Berger
2001-713  (November 2001)

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 1950ís and 1960ís 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.

Full paper (303 KB PDF)

productivity, technology

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