Maintenance Costs, Obsolescence, and Endogenous Growth
2001-06-19
Research Paper
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We analyze the impact of obsolescence of economic inventions by incorporating maintenance costs in the endogenous growth model of expanding product varieties. This contrasts with the existing literature, which ignores maintenance costs and uses the model of quality improvements to describe obsolescence. If the maintenance costs become too high, the operating profits become negative and the firm stops producing the variety. This diminishes the life span of innovations, thus reducing the return on investment in research and development and the growth rate of the economy.
Keywords
Classifications using
Journal of Economic Literature (JEL) Classification System
- O33 : Technological Change: Choices and Consequences; Diffusion Processes
- O41 : One, Two, and Multisector Growth Models
- O31 : Innovation and Invention: Processes and Incentives
- F43 : Economic Growth of Open Economies
Automatically Extracted Terms
- maintenance
- maintenance costs
- growth
- production
- equilibrium
- wage rate
- variety
- labor
- time t
- production process
- innovation
- equation
- growth rate
- figure
- growth equilibrium
- obsolescence
- period
- increase
- elasticity
- labor market equilibrium
