The average service life of fixed assets in U.S. manufacturing industries increased gradually from 1962 to 1969. Thereafter, it fell sharply up to the mid-1970s. The most rapid change occurred in the three years following the Arab oil embargo. There is reason to believe that these events were causally related: the rapid escalation of petroleum prices caused the decline in useful lives of plant and machinery. The reasoning behind this statement and an analysis of the data on service lives of fixed assets are the topic of this paper.
BemdtD.WoodD. (1975). “Technology, Prices, and the Derived Demand for Energy.” Review of Economic Studies57,3:259-68.
2.
BoddyR.GortM. (1973). “Capital Expenditures and Capital Stocks.” An rurts of Economic and Social Measurement2,3:245-62.
3.
FeldsteinM.RothschildM. (1974). “Towards an Economic Theory of Replacement Investment.” Ecommetrica42, 3:393-423.
4.
FussM. (1977). “The Structure of Technology over Time: A Model for Testing- the ‘Putty-Clay’ Hypothesis.” Econometrica45,8:1797-1821.
5.
GibbonsJ. (1983). “A Note on Capital—Energy Substitution in the Long Run.” The Energy Journal.
6.
McFaddenD.FussM. (1976). “Flexibility versus Efficiency in Ex Ante Plant Design.” In FussM.McFaddenD. (eds.), Production Economics: A Dual Approach to Theory and Applications. Amsterdam: North-Holland Publishing Co.
7.
OzatalayS.GrubaughS.and LongT. (1979). “Energy Substitution and National Economic Policy.” American Economic Review69,2:369-71.
8.
ParksR. (1979). “Durability, Maintenance, and the Price of Used Assets.” Economic Inquiry17,2:197-217.
9.
TerborghB. (1949). Dynamic Equipment Policy. New York: McGraw-Hill Book Co.
