ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Capital Scrapping and Exports

A Vintage Model

With the machine tool industry as the reference point, this paper builds a vintage model to demonstrate that the economic lifespan of machines is inversely related to the rate of technological progress. Further, the rate of technical progress in an underdeveloped economy is not exogenous but varies directly with the share of domestic production geared towards exports (or the rate of growth of exports). Exports, through the demand generated by more discerning users/consumers in high-income economies, induce domestic producers into embodying new technologies in machines of a later vintage.

I would like to thank Amit Bhaduri, Prabhat Patnaik, K L Krishna and particularly Amal Sanyal for their guidance in writing this paper. I take complete responsibility for the errors that remain.

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