Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2001-06-19
Number: 01-060/2
Author-Name: Koen G. Berden
Author-Email: berden@few.eur.nl
Author-Workplace-Name: Erasmus University Rotterdam
Author-Name: Charles van Marrewijk
Author-Email: vanmarrewijk@few.eur.nl
Author-Workplace-Name: Erasmus University Rotterdam
Title: Maintenance Costs, Obsolescence, and Endogenous Growth
Abstract: We analyze the impact of obsolescence of economic inventions by incorporating maintenance costsin the endogenous growth model of expanding product varieties. This contrasts with the existingliterature, which ignores maintenance costs and uses the model of quality improvements todescribe obsolescence. If the maintenance costs become too high, the operating profits becomenegative 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 theeconomy.
Classification-JEL: F43; O31; O33; O41
Keywords: endogenous growth; obsolescence; maintenance; innovation; variety
File-Url: https://papers.tinbergen.nl/01060.pdf
File-Format: application/pdf
File-Size: 142393 bytes
Handle: RePEc:tin:wpaper:20010060