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Working Paper 03-07 - Capital services and total factor productivity measurements : impact of various methodologies for Belgium

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  • Bernadette Biatour
  • Geert Bryon
  • Chantal Kegels
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    Abstract

    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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    Bibliographic Info

    Paper provided by Federal Planning Bureau, Belgium in its series Working Papers with number 0703.

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    Date of creation: 01 Mar 2007
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    Handle: RePEc:fpb:wpaper:0703

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    Keywords: TFP;

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