Measurement of Capital Stock: The PIM and the Equivalent Proportional Depreciation Approach

Madhusudan Datta
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Madhusudan Datta: Department of Economics, University of Kalyani, West Bengal, India

Indian Economic Review, 2006, vol. 41, issue 2, pages 173-194

Abstract: Estimation of capital stock appropriate for productivity analyses is a tricky problem. PIM can at best be considered a passable estimate of the asset value of capital goods or the wealth stock. An alternative to the PIM is the OHSM. For a uniform exponential growth of investment there exist equivalent proportional rates of depreciation (EPD) of capital stock for both the OHSM and the PIM. Use of the formulae for EPD can help in obtaining acceptable estimates of capital stock using data on gross fixed capital formation when estimates are not available from authentic sources. Moreover, EPD can be derived by using suitable assumptions to estimate service capital appropriate for use as an argument of the production function.

Keywords: perpetual inventory method; one-hoss-shay method; equivalent proportional depreciation; age-efficiency profile; service capital (search for similar items in EconPapers)
JEL-codes: C81 C82 O47 (search for similar items in EconPapers)

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