Economic *growth models with capital heterogeneity and vintage specific technological change.

Abstract

This dissertation carefully investigates capital heterogeneity both across and within vintages of production in Solow type neo-classical vintage growth models. The heterogeneity within vintages considered is in two dimensions: depreciation rates and vintage specificities. We develop and analyze three vintage growth models, which focus on heterogeneity of (i) structures and equipment; (ii) intangible capital and tangible capital; and (iii) intangible capital, equipment, and structures. We show in all these models that production functions, which are differentiated by vintages, can be aggregated to a simple aggregate function with appropriate valuations of capital stocks, even when each vintage of capital has a different unit of efficiency. The first model assumes that equipment depreciates faster than structures do; equipment is vintage specific, and structures are not. We show that observed patterns of the ratio of the stock of structures to equipment and that of the investment, and dispersion of the stock of structures across vintages over time are consistent with the model. Usage of Gordon's price index improves the consistency, providing new support for this index. The second model assumes that intangible capital does not depreciate while tangible capital does, and both types of capital are vintage specific. We show that if vintage specific technological progress is above a threshold, the product of intangible capital's share and the difference in the depreciation rates, then all new investment will concentrate on the latest vintage of both capital types. Otherwise, a part of the investment will he allocated to vintage tangible capital, maintaining the prices of vintage tangible capital unity. This result suggests that vintage specific technological progress cannot be observed as a change in prices when the progress is extremely slow. The third model integrates the first two models. In the last essay, we estimate the parameters of the model using national accounts data of the U.S. and Japan. Using four alternative specifications, we show that the parameters of production functions of the two countries are alike, suggesting that the two countries have a similar economic system of production. The estimates of intangible capital's share range from three to ten percent in both countries.