Embodiment, Productivity, and the Age Distribution of Capital
AbstractAn important theme in modern research on productivity has been that technological progress may be embodied in capital in the sense that traditional measures of TFP growth reflect unmeasured improvements in the quality of capital inputs as well as pure disembodied technological progress. It is commonly believed that an implication of this embodiment hypothesis is that there should be a negative relationship between measured TFP and the age of the measured capital stock. This paper presents empirical evidence which suggests that an increase in the age of the capital stock is actually associated with higher TFP. This surprising result may be due to the presence of a mis-measurement normally overlooked in this literature: With mis-measured improvements in capital quality, the usual depreciation rates used to construct empirical capital stocks are incorrect for growth accounting. This effect dominates the usual average age effect.
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Bibliographic InfoPaper provided by Central Bank of Ireland in its series Research Technical Papers with number 4/RT/03.
Length: 23 pages
Date of creation: Aug 2003
Date of revision:
Other versions of this item:
- Whelan, Karl, 2007. "Embodiment, productivity, and the age distribution of capital," Journal of Macroeconomics, Elsevier, vol. 29(4), pages 724-740, December.
- Whelan, Karl, 2005. "Embodiment, Productivity, and the Age Distribution of Capital," MPRA Paper 5912, University Library of Munich, Germany.
- O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
- E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
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