Aggregating Heterogeneous Capital Goods in Adjustment-cost Technologies
This paper deals with the existence of an aggregate adjustment-cost technology that characterizes the feasible intertemporal paths of an aggregate capital stock, an aggregate investment rate and aggregate net outputs. The results indicate that only very restrictive adjustment-cost technologies can be aggregated consistently. Therefore the use of aggregative models cannot be justified by functional structure assumptions except in relatively uninteresting circumstances, so that alternative justifications and interpretations should be investigated.
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