The Estimation of a Vintage Model of Production for UK Manufacturing

Abstract

The "clay-clay" approach enables the life of capital equipment estimated from the model to vary over time but assumes away the interesting problems involved in the ex-ante choice of technique. The "putty-clay with constant service life" approach incorporates the ex-ante choice of technique but, because service life is assumed constant over time, rules out considerations of, for example, the effect of increases in investment incentives on modernization by earlier replacement of equipment. Hence neither approach is entirely satisfactory. The purpose of this paper is to present an estimation method for the putty-clay model that allows both ex-ante choice of technique and a variable life of capital equipment. For all sections of the paper except that immediately following it is assumed, as in all the above-mentioned studies using the putty-clay model, that the ex-ante production function is Cobb-Douglas. [ABSTRACT FROM AUTHOR] Copyright of Review of Economic Studies is the property of Oxford University Press / USA and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)