Publication Type
Journal Article
Version
acceptedVersion
Publication Date
8-2022
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 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 downward. Transition dynamics are rapid, so that steady-state comparisons give an accurate picture of the welfare impact of vintage tax wedges.
Keywords
Capital taxation, Embodiment controversy, Investment subsidies, Transition dynamics, Vintage capital
Discipline
Economic Theory
Research Areas
Economic Theory
Publication
Journal of Money, Credit and Banking
Volume
54
Issue
5
First Page
1175
Last Page
1222
ISSN
0022-2879
Identifier
10.1111/jmcb.12912
Publisher
Wiley
Citation
SAMANIEGO, Roberto M. and SUN, Juliana Yu.
The embodiment controversy: On the policy implications of vintage capital models. (2022). Journal of Money, Credit and Banking. 54, (5), 1175-1222.
Available at: https://ink.library.smu.edu.sg/soe_research/2560
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1111/jmcb.12912