Estimating Capital Efficiency Schedules Within Production Functions

Mark Doms

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: The appropriate method for aggregating capital goods across vintages to produce a single capital stock measure has long been a contentious issue, and the literature covering this topic is quite extensive. This paper presents a methodology that estimates efficiency schedules within a production function, allowing the data to reveal how the efficiency of capital goods evolve as they age. Specifically we insert a parameterized investment stream into the position of a capital variable in a production function, and then estimate the parameters of the production function simultaneously with the parameters of the investment stream. Plant level panel data for a select group of steel plants employing a common technology are used to estimate the model. Our primary finding is that when using a simple Cobb Douglas production function, the estimated efficiency schedules appear to follow a geometric pattern, which is consistent with the estimates of economic depreciation of Hulten and Wykoff (1981). Results from more flexible functional forms produced much less precise and unreliable estimates.

Keywords: CES; economic; research; micro; data; microdata; chief; economist (search for similar items in EconPapers)
Date: 1992-05
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Citations: View citations in EconPapers (2)

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https://www2.census.gov/ces/wp/1992/CES-WP-92-04.pdf (application/pdf)

Related works:
Journal Article: Estimating Capital Efficiency Schedules within Production Functions (1996)
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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:92-4

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