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Sensitivity of capital and MFP measurement to asset depreciation patterns and initial capital stock estimates

Pierre-Alain Pionnier, Maria Belen Zinni and Kéa Baret

No 2023/01, OECD Statistics Working Papers from OECD Publishing

Abstract: This paper discusses the sensitivity of capital and multifactor productivity (MFP) measurement to asset depreciation patterns and initial capital stock estimates. Applying the same depreciation rates in the US as in other G7 countries would reduce the US net investment rate and net capital stock by up to one third and increase US GDP by up to 0.5%. Capital and MFP growth would be less affected. Estimating initial capital stocks often involves assuming constant investment growth, but this leads to unreliable results. Relying on average K/Y ratios across countries works well for the US, but this might not be the case for other countries due to the international dispersion in K/Y ratios. Two main recommendations for statistical agencies emerge from this analysis. First, they should regularly review asset depreciation patterns to ensure that measured differences across countries are well justified. Second, they should backcast investment series as much as possible before relying on stationarity assumptions to estimate initial capital stocks.

Keywords: asset depreciation; capital services; capital stock; multifactor productivity; national accounts (search for similar items in EconPapers)
JEL-codes: E01 E22 E23 O47 (search for similar items in EconPapers)
Date: 2023-01-09
New Economics Papers: this item is included in nep-eff
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