The devil is in the details: Capital stock estimation and aggregate productivity growth—An application to the Spanish economy

Francisco-Javier Escribá-Pérez, María-José Murgui-García () and José Ruiz-Tamarit
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Francisco-Javier Escribá-Pérez: Universitat de València
María-José Murgui-García: Universitat de València

Portuguese Economic Journal, 2022, vol. 21, issue 1, No 3, 50 pages

Abstract: Abstract The variables that contribute to explaining the major puzzles and paradoxes in macroeconomics and economic growth literature always appear related, directly or indirectly, to capital stock and depreciation. Depreciation defined in a narrow sense refers only to physical wear and tear, but in a broader sense, it also includes economic deterioration and obsolescence. In this study, we explore the link between these two depreciation concepts, the capital deepening and total factor productivity (TFP) growth. We propose a double growth accounting framework that allows us to establish a relationship between variables in statistical terms and variables in economic terms. Then, with Spanish data for 1964–2015, we first analyze the role played by capital intensity and TFP in explaining the evolution of labor productivity. The results are substantially different depending on whether we use statistical or economic measures of capital and depreciation. Second, we focus on the paradox of productivity, concluding that the apparent absence of a positive correlation between investment in information and communication technology and the TFP growth rate may be due to the delay effect associated with such investment combined with the statistical under-estimation of true economic depreciation.

Keywords: Capital; Depreciation; ICT; Slowdown; TFP (search for similar items in EconPapers)
JEL-codes: E22 O33 O47 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10258-020-00187-z

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