ON THE ECONOMETRIC ESTIMATION OF A VARIABLE RATE OF DEPRECIATION

Ignacio Mauleón () and José Hernández ()

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: Measuring the capital stock is crucial in some fields of economic research. Capital stock is not observable, and its estimation requires the knowledge of its rate of depreciation. In most of the cases, econometric is not used for this task. However this methodology is adecuate to generate measures consistent with its productivity and the technology of the economy. If we assume that the depreciation rate is not constant, its estimation poses some technical difficulties. In principle, it is not possible to use standard econometric packages. In this note we suggest two estimation methods of a variable rate of depreciation which are easily implementable in standard packages by means of NLS or ML. The formalization of these methods and empirical evidence on its implementation is shown.

Keywords: Capital Stock; Variable Depreciation Rate; Production Function Estimation (search for similar items in EconPapers)
Pages: 24 pages
Date: 2002-07
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