Costly technology adoption and capital accumulation

Aubhik Khan, B. Ravikumar

Research output: Contribution to journalArticle

11 Scopus citations

Abstract

We develop a model of costly technology adoption where the cost is irrecoverable and fixed. Households must decide when to switch from an existing technology to a new, more productive technology. Using a recursive approach, we show that there is a unique threshold level of wealth above which households will adopt the new technology and below which they will not. This threshold is independent of preference parameters and depends only on technology parameters. Prior to adoption, households invest at increasing rates, but consumption growth is constant.

Original languageEnglish (US)
Pages (from-to)489-502
Number of pages14
JournalReview of Economic Dynamics
Volume5
Issue number2
DOIs
StatePublished - Jan 1 2002

ASJC Scopus subject areas

  • Economics and Econometrics

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