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Measurement of Capital Stock: The PIM and the Equivalent Proportional Depreciation Approach

Author

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  • Madhusudan Datta

    (Department of Economics, University of Kalyani, West Bengal, India)

Abstract

Estimation of capital stock appropriate for productivity analyses is a tricky problem. PIM can at best be considered a passable estimate of the asset value of capital goods or the wealth stock. An alternative to the PIM is the OHSM. For a uniform exponential growth of investment there exist equivalent proportional rates of depreciation (EPD) of capital stock for both the OHSM and the PIM. Use of the formulae for EPD can help in obtaining acceptable estimates of capital stock using data on gross fixed capital formation when estimates are not available from authentic sources. Moreover, EPD can be derived by using suitable assumptions to estimate service capital appropriate for use as an argument of the production function.

Suggested Citation

  • Madhusudan Datta, 2006. "Measurement of Capital Stock: The PIM and the Equivalent Proportional Depreciation Approach," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 41(2), pages 173-194, December.
    • Handle: RePEc:dse:indecr:v:41:y:2006:i:2:p:173-194
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    Cited by:

    1. Virtue U. Ekhosuehi, 2021. "Optimal control of external debt for a developing economy," OPSEARCH, Springer;Operational Research Society of India, vol. 58(4), pages 889-905, December.

    More about this item

    Keywords

    perpetual inventory method; one-hoss-shay method; equivalent proportional depreciation; age-efficiency profile; service capital;
    All these keywords.

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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