Optimal growth under endogenous depreciation, capital utilization and maintenance costs

This paper analyzes the equilibrium dynamics of an optimal growth model with endogenous depreciation, variable capital utilization, and expenditures on the maintenance of physical capital. Maintenance reduces the depreciation of capital, utilization affects the activity of maintainance. We establish a set of sufficient conditions for the existence and uniqueness of a steady state equilibrium. We define a "delta golden rule" consistent with the proposed economic environment and we analyze the dynamic efficiency of this economy. Finally, the steady state is found to be locally saddle-path stable. (Copyright: Fundación Empresa Pública)