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Measuring Capital Services by Energy Use: An Empirical Comparative Study

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  • Jürgen Bitzer

    ()
    (University of Oldenburg, Department of Economics)

  • Erkan Gören

Abstract

From an engineering perspective, a capital good’s service is energy conversion – e.g., the physical ‘work’ done by a machine – and can thus be measured directly by the energy consumed in production. We show important empirical advantages of our concept over traditional measures. The empirical application reveals that our concept avoids a number of conceptual problems of the latter. Furthermore, our measure is more sensitive to fluctuations in economic activity and therefore captures the utilization of the capital stock better. In a growth accounting exercise, this results in higher TFP growth rates, especially in times of global recession.

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File URL: http://www.uni-oldenburg.de/fileadmin/user_upload/wire/fachgebiete/vwl/V-351-13.pdf
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Bibliographic Info

Paper provided by University of Oldenburg, Department of Economics in its series Working Papers with number V-351-13.

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Length: 33 pages
Date of creation: Apr 2013
Date of revision: Apr 2013
Publication status: Published in Oldenburg Working Papers V-351-13
Handle: RePEc:old:dpaper:351

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Keywords: capital service; utilization; energy consumption; total factor productivity; growth accounting;

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  1. Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 1995. "Capital utilization and returns to scale," Working Paper Series, Macroeconomic Issues 95-5, Federal Reserve Bank of Chicago.
  2. Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 1995. "Sectoral Solow Residuals," NBER Working Papers 5286, National Bureau of Economic Research, Inc.
  3. Calvo, Guillermo A, 1975. "Efficient and Optimal Utilization of Capital Services," American Economic Review, American Economic Association, vol. 65(1), pages 181-86, March.
  4. Beatriz Rumbos & Leonardo Auernheimer, 2001. "Endogenous capital utilization in a neoclassical growth model," Atlantic Economic Journal, International Atlantic Economic Society, vol. 29(2), pages 121-134, June.
  5. Mary O'Mahony & Marcel P. Timmer, 2009. "Output, Input and Productivity Measures at the Industry Level: The EU KLEMS Database," Economic Journal, Royal Economic Society, vol. 119(538), pages F374-F403, 06.
  6. Moody, Carlisle E, Jr, 1974. "The Measurement of Capital Services by Electrical Energy," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 36(1), pages 45-52, February.
  7. W. Erwin Diewert, 2003. "Measuring Capital," NBER Working Papers 9526, National Bureau of Economic Research, Inc.
  8. Berndt, Ernst R. & Fuss, Melvyn A., 1986. "Productivity measurement with adjustments for variations in capacity utilization and other forms of temporary equilibrium," Journal of Econometrics, Elsevier, vol. 33(1-2), pages 7-29.
  9. Costello, Donna M, 1993. "A Cross-Country, Cross-Industry Comparison of Productivity Growth," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 207-22, April.
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