This Working Paper presents the different methodologies currently used to construct a volume index of capital services and analyzes the effects of methodological changes on capital services and total factor productivity estimates for Belgium over the period 1970-2004. The measurement of capital services is realized in two steps. First, productive capital stocks have to be estimated for each type of asset. Two methodologies are generally used: the geometric and the hyperbolic profile. Secondly, these stocks are aggregated, using the user costs of capital (exante or ex-post approach) as weights to derive an overall index. For the economy as a whole and the entire period, under an ex-post approach, the volume indices of capital services estimated with a hyperbolic age-efficiency profile grow at a higher rate than the indices estimated with a geometric profile. This general conclusion is, however, not observed in every sector. Under an ex-ante approach, the different volume indices are quite similar for the whole economy, even if the indices grow generally at a slightly higher rate in the case of a geometric pattern. A higher growth rate of the volume indices generates a higher capital contribution and, consequently, a lower TFP contribution. Over long periods of time, the different TFP estimates are relatively similar. Over shorter periods, the different methodologies generate more significant variations in the TFP contribution.
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Paper provided by Federal Planning Bureau, Belgium in its series Working Papers with number
0703.
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Find related papers by JEL classification: C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Microeconomic Data D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General