Technological progress and endogenous capital depreciation: evidence from the U.S. and Japan
AbstractJapanese government planners use the average age of the manufacturing capital stock as one measure of their country's international "competitiveness." Compared to the U.S., the data show that Japanese depreciation rates are higher and that capital stocks are younger. ; In much of economic analysis, higher rates of depreciation are assumed to result in poorer economic performance. A high depreciation rate lowers the net capital stock, and decreases the level of output. ; In this paper, we argue that Japan's high depreciation rate is caused by that country's high rate of technological progress. Hiqh depreciation rates may be a symptom of a rapidly growing economy. ; Our results have implications for the international comparison of investment rates. Many economists have compared U.S. and Japanese investment rates net of the depreciation of capital. Presumably, economists are interested in investment rates because of the belief that high rates are positively correlated with a high level of economic performance. ; If technological progress causes depreciation rates to be high, however, net investment rates may not be informative about a nation's welfare. Two countries with the same net investment rate can have different rates of per capita output growth if their rates of technological progress are different. We show that the investment rate gross of depreciation may be a better indicator of welfare.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 485.
Date of creation: 1994
Date of revision:
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Ludmila Fadejeva & Aleksejs Melihovs, 2009.
"Measuring Total Factor Productivity and Variable Factor Utilisation: Sector Approach, The Case of Latvia,"
2009/03, Latvijas Banka.
- Ludmila Fadejeva & Aleksejs Melihovs, 2010. "Measuring Total Factor Productivity and Variable Factor Utilization," Eastern European Economics, M.E. Sharpe, Inc., vol. 48(5), pages 63-101, September.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kris Vajs) The email address of this maintainer does not seem to be valid anymore. Please ask Kris Vajs to update the entry or send us the correct address.
If references are entirely missing, you can add them using this form.