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Capital accumulation and embodied technological progress

Grass,D.
; 
Hartl,R.F.
; 
Kort,P.M.
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.
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Date
2012-08
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Tilburg University Research Output Collection
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Keywords
optimal control, multi-stage maximum principle, capital accumulation, technology adoption
Citation
Grass, D, Hartl, R F & Kort, P M 2012, 'Capital accumulation and embodied technological progress', Journal of Optimization Theory and Applications, vol. 154, no. 2, pp. 588-614. https://doi.org/10.1007%2Fs10957-012-0042-5
URI
https://hdl.handle.net/20.500.14602/60910
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