Ex post versus ex ante measures of the user cost of capital

Nicholas Oulton

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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 E10 E22 O47 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2005-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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http://eprints.lse.ac.uk/19885/ Open access version. (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)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:19885

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