Affiliations: [a] Emeritus, Professor of Economics, Department of
Economics, Athens University of Economics and Business, 76 Patission Street,
Athens 104 34, Greece
Correspondence:
[*]
Correspondence: George C. Bitros, Emeritus
Professor of Economics, Department of Economics, Athens University of Economics
and Business, 76 Patission Street, Athens 104 34, Greece. Tel.: +30 210 8203740;
Fax: +30 210 8203301; E-mail: [email protected]
Abstract: The received theory of aggregation of producer durables has been erected on
certain fundamental hypotheses. One of them is that producer durables
deteriorate exponentially, which implies that their replacement is proportional
to the corresponding capital stocks. However the proportionality hypothesis
conflicts with most of the available theoretical and empirical evidence. So an
effort to relax it is long overdue. To this end the present paper investigates
the conditions for aggregation in a two-sector vintage capital model with
exogenous technological change and endogenous useful lives. In the model
aggregation is achieved by adapting the procedure first suggested by Haavelmo
[11]. From the simulations of the solution with data from the United States in
the post-war period it is found that the conventional approach to aggregation
may be responsible for significant biases in the measurement of capital stocks.
