We propose in this paper a two-sector model of economic growth with endogenous capital goods?' lifespan and embodied technological change. We show that an investment-specific technological shock modifies the optimal lifespan of capital goods and biases traditional total factor productivity...

In a recent work, Karl Whelan [2003] argues that the hypothesis of balanced growth is firmly rejected by postwar u.s. data. There is some clear evidence that the ratio of real investment to real consumption has exhibited an upward trend since the late 1950s. In this case, the traditional...