Vintage Capital Growth Theory: Three Breakthroughs

• Authors: Omar Licandro.
• BSE Working Paper: 110054 | September 15
• Keywords: endogenous growth , Vintage capital , embodied technical progress , growth accounting , optimal control , vintage human capital , demography
• JEL codes: D63, D64, C61, 040
• endogenous growth
• Vintage capital
• embodied technical progress
• growth accounting
• optimal control
• vintage human capital
• demography

Vintage capital growth models have been at the heart of growth theory in the 60s. This research line collapsed in the late 60s with the so-called embodiment controversy and the technical sophistication of the vintage models. This paper analyzes the astonishing revival of this literature in the 90s. In particular, it out- lines three methodological breakthroughs explaining this resurgence: a growth accounting revolution, taking advantage of the availability of new time series, an optimal control revolution allowing to safely study vintage capital optimal growth models, and a vintage human capital revolution, along with the rise of economic demography, accounting for the vintage structure of human capital similarly to physical capital age structuring. The related literature is surveyed.