Ex Post Versus Ex Ante Measures of the User Cost of Capital

Nicholas Oulton

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: When doing growth accounting, should we use ex post or ex ante measures of user costs to calculate the contribution of capital? The answer, based on a simple model of temporary equilibrium, is that ex post is better in theory. In practice researchers usually calculate ex post user costs by assuming that the rate of return is equalised across assets. But this is only true if expectations are correct. A numerical example shows that either ex ante or ex post can be closer to the true measure, depending on the parameters. I propose a hybrid method that makes use of elements of both approaches. I test this and the other methods using data for 31 UK industries.

Keywords: User cost; capital; ex post; ex ante; growth accounting (search for similar items in EconPapers)
JEL-codes: C43 E01 E22 O47 (search for similar items in EconPapers)
Date: 2005-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://cep.lse.ac.uk/pubs/download/dp0698.pdf (application/pdf)

Related works:
Journal Article: EX POST VERSUS EX ANTE MEASURES OF THE USER COST OF CAPITAL (2007)
Working Paper: Ex post versus ex ante measures of the user cost of capital (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cep:cepdps:dp0698

Access Statistics for this paper

More papers in CEP Discussion Papers from Centre for Economic Performance, LSE
Bibliographic data for series maintained by ().