Appreciating depreciation: physical capital depreciation in a developing country
AbstractLittle is known about the nature of physical capital in the less-developed countries. This article addresses the lack of empirical study related to depreciation rates, which are a neglected but important ingredient of both micro and macro models and empirical analyses. Based on rich establishment-level survey data, and using a straightforward econometric approach, I estimate depreciation rates of physical capital invested in manufacturing enterprises in Indonesia. I estimate the depreciation rate to be between 8 and 14 %. These numbers compare roughly to published estimates for the U.S. I then investigate hypotheses related to heterogeneity of depreciation rates across different types of firms. Finally, I test the hypothesis that financially constrained firms use less durable investment goods. Copyright Springer-Verlag 2013
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Bibliographic InfoArticle provided by Springer in its journal Empirical Economics.
Volume (Year): 44 (2013)
Issue (Month): 3 (June)
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Find related papers by JEL classification:
- O14 - Economic Development, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
- D92 - Microeconomics - - Intertemporal Choice - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- L6 - Industrial Organization - - Industry Studies: Manufacturing
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