Estimating Capital Efficiency Schedules within Production Functions

Mark Doms

Economic Inquiry, 1996, vol. 34, issue 1, 78-92

Abstract: The author estimates capital efficiency schedules within a production function, allowing the data to reveal how the efficiency of capital goods evolves as they age. A parameterized investment stream is used as a capital variable in a production function and the parameters of the production function are estimated simultaneously with the parameters of the investment stream. Plant-level panel data for steel plants employing a common technology are used to estimate the model. The author finds that the estimated efficiency schedules appear to follow a geometric pattern, which is consistent with the estimates of economic depreciation of C. Hulten and F. Wykoff (1981). Copyright 1996 by Oxford University Press.

Date: 1996
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Working Paper: Estimating Capital Efficiency Schedules Within Production Functions (1992)
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