Is Soviet Capital Too Old?

Abstract

This paper derives expressions for the length of output-maximizing service lives of capital assets in a steady-state economy. The main determinants are the rate of growth of the labor force, the rate of disembodied technical progress, the share of investment, and production-function parameters. Various data sources on the actua l length of service lives of Soviet industrial capital assets are ass essed. Calculations are presented which suggest that had the service lives of Soviet industrial capital assets been shorter, the level of Soviet industrial output would have been higher by a few percentage p oints. Copyright 1987 by The Review of Economic Studies Limited.