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An Economical Approach to Estimate a Benchmark Capital Stock. An Optimal Consistency Method

Author

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  • Jose Miguel Albala-Bertrand

    (Queen Mary, University of London)

Abstract

There are alternative methods of estimating capital stock for a benchmark year. However, these methods are costly and time-consuming, requiring the gathering of much basic information as well as the use of some convenient assumptions and guesses. In addition, a way is needed of checking whether the estimated benchmark is at the correct level. This paper proposes an optimal consistency method (OCM), which enables a capital stock to be estimated for a benchmark year, and which can also be used in checking the consistency of alternative estimates. This method, in contrast to most current approaches, pays due regards both to potential output and to the productivity of capital. It works well, and it requires only small amounts of data, which are readily available. This makes it virtually costless in both time and funding.

Suggested Citation

  • Jose Miguel Albala-Bertrand, 2003. "An Economical Approach to Estimate a Benchmark Capital Stock. An Optimal Consistency Method," Working Papers 503, Queen Mary University of London, School of Economics and Finance.
    • Handle: RePEc:qmw:qmwecw:503
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    File URL: https://www.qmul.ac.uk/sef/media/econ/research/workingpapers/2003/items/wp503.pdf
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    References listed on IDEAS

    as
    1. Robert M. Solow, 1994. "Perspectives on Growth Theory," Journal of Economic Perspectives, American Economic Association, vol. 8(1), pages 45-54, Winter.
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    3. Hofman, Andre A, 2000. "Standardised Capital Stock Estimates in Latin America: A 1950-94 Update," Cambridge Journal of Economics, Oxford University Press, vol. 24(1), pages 45-86, January.
    4. A. P. Thirlwall, 1989. "Growth and Development," Palgrave Macmillan Books, Palgrave Macmillan, edition 0, number 978-1-349-19837-5.
    5. Charles R. Hulten, 1992. "Growth Accounting When Technical Change is Embodied in Capital," NBER Working Papers 3971, National Bureau of Economic Research, Inc.
    6. André A. Hofman, 2000. "The Economic Development of Latin America in the Twentieth Century," Books, Edward Elgar Publishing, number 1534.
    7. Hulten, Charles R, 1992. "Growth Accounting When Technical Change Is Embodied in Capital," American Economic Review, American Economic Association, vol. 82(4), pages 964-980, September.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Jose Miguel Albala-Bertrand, 2007. "Net Capital Stock and Capital Productivity for China and Regions: 1960-2005. An Optimal Consistency Method," Working Papers 610, Queen Mary University of London, School of Economics and Finance.
    2. Claudia Henríquez G., 2008. "Stock de Capital en Chile (1985-2005): Metodología y Resultados," Economic Statistics Series 63, Central Bank of Chile.
    3. Jose Miguel Albala-Bertrand, 2004. "Can the Composition of Capital Constrain Potential Output? A Gap Approach," Working Papers 510, Queen Mary University of London, School of Economics and Finance.
    4. Jose Miguel Albala-Bertrand, 2007. "Net Capital Stock and Capital Productivity for China and Regions: 1960-2005. An Optimal Consistency Method," Working Papers 610, Queen Mary University of London, School of Economics and Finance.
    5. J.M. Albala-Bertrand, 2018. "Structural Change behind GDP Growth Rates via Key Indicators: Chile 1996-2015," International Business Research, Canadian Center of Science and Education, vol. 11(8), pages 38-47, August.
    6. Emmanuel C. Mamatzakis, 2007. "An Analysis of the Impact of Public Infrastructure on Productivity Performance of Mexican Industry," CESifo Working Paper Series 2099, CESifo.
    7. Jose Miguel Albala-Bertrand, 2004. "Can the Composition of Capital Constrain Potential Output? A Gap Approach," Working Papers 510, Queen Mary University of London, School of Economics and Finance.
    8. Mamatzakis, E. & Tsionas, M., 2018. "Revisiting the returns of public infrastructure in Mexico: A limited information local likelihood estimation," Economic Modelling, Elsevier, vol. 75(C), pages 132-141.
    9. J. M. Albala‐Bertrand & E. C. Mamatzakis, 2007. "The Impact Of Disaggregated Infrastructure Capital On The Productivity Growth Of The Chilean Economy," Manchester School, University of Manchester, vol. 75(2), pages 258-273, March.
    10. Fachru Nofrian, 2019. "Industrialization and Profit-Rate Analysis in Indonesia," Review of Radical Political Economics, Union for Radical Political Economics, vol. 51(3), pages 438-456, September.

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    More about this item

    Keywords

    Benchmark capital; Perpetual Inventory Method (PIM); Potential output; Capital productivity; Optimal Consistency Method (OCM);
    All these keywords.

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology

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