Capital accumulation and embodied technological progress

D. Grass, R.F. Hartl, P.M. Kort

Research output: Contribution to journalArticleScientificpeer-review

8 Citations (Scopus)

Abstract

This paper combines technology adoption with capital accumulation taking into account technological progress. We model this as a multi-stage optimal control problem and solve it using the corresponding maximum principle. The model with linear revenue can be solved analytically, while the model with market power is solved numerically. We obtain that investment jumps upwards right at the moment that a new technology is adopted. We find that, if the firm has market power, the firm cuts down on investment before a new technology is adopted. Furthermore, we find that larger firms adopt a new technology later.
Original languageEnglish
Pages (from-to)588-614
JournalJournal of Optimization Theory and Applications
Volume154
Issue number2
DOIs
Publication statusPublished - Aug 2012

Keywords

  • optimal control
  • multi-stage maximum principle
  • capital accumulation
  • technology adoption

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