Munich Personal RePEc Archive

The Embodiment Controversy: on the Policy Implications of Vintage Capital models

Samaniego, Roberto (2016): The Embodiment Controversy: on the Policy Implications of Vintage Capital models.

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Abstract

We explore the long run impact of policy on the level of economic activity through changes in the vintage distribution of capital, in a model where different vintages coexist in production. Because firms can choose the vintage of capital in which they invest, investment subsidies do not in general affect the vintage structure of capital. In contrast, vintage-specific taxes or subsidies that target the newest vintages of capital can significantly affect output and welfare in the long run, mainly downwards.

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