Appreciating depreciation: physical capital depreciation in a developing country

Matthias Schündeln ()

Empirical Economics, 2013, vol. 44, issue 3, 1277-1290

Abstract: Little is known about the nature of physical capital in the less-developed countries. This article addresses the lack of empirical study related to depreciation rates, which are a neglected but important ingredient of both micro and macro models and empirical analyses. Based on rich establishment-level survey data, and using a straightforward econometric approach, I estimate depreciation rates of physical capital invested in manufacturing enterprises in Indonesia. I estimate the depreciation rate to be between 8 and 14 %. These numbers compare roughly to published estimates for the U.S. I then investigate hypotheses related to heterogeneity of depreciation rates across different types of firms. Finally, I test the hypothesis that financially constrained firms use less durable investment goods. Copyright Springer-Verlag 2013

Keywords: Depreciation rate; Capital stock; Investment; Manufacturing; Indonesia; O14; D92; E22; L6 (search for similar items in EconPapers)
Date: 2013
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DOI: 10.1007/s00181-012-0592-2

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