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Depreciation, Deterioration and Obsolescence when there is Embodied or Disembodied Technical Change

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Author Info
Diewert, W. Erwin
Wykoff, Frank C.

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Abstract

The paper considers how to measure capital in a model where technical progress is either embodied in new units of capital or it is "disembodied" and simply causes the price of capital services to fall. The disembodied case is considered in sections 2-4. Sections 2 and 3 set out standard vintage capital aggregation models when there is no embodied technical progress. Section 4 discusses disembodied obsolescence in more detail. Section 5 introduces new (more efficient) models of the capital good so that technical progress is embodied in the new models. Section 6 shows how the parameters in the Jorgenson model of capital services could be estimated by statistical agencies if their investment surveys covered sales and retirements of used assets as well as purchases of new assets. Section 7 concludes.

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Publisher Info
Paper provided by UBC Department of Economics in its series UBC Departmental Archives with number diewert-06-11-23-08-38-56.

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Length: 31 pages
Date of creation: 23 Nov 2006
Date of revision: 13 Jul 2007
Handle: RePEc:ubc:bricol:diewert-06-11-23-08-38-56

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Related research
Keywords: Aggregation of Capital; embodiment of technical progress; depreciation; deterioration; obsolescence; index number theory;

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Find related papers by JEL classification:
C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
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
D92 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Firm Choice and Growth, Investment, or Financing
E22 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
M4 - Business Administration and Business Economics; Marketing; Accounting - - Accounting

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References listed on IDEAS
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  1. Hulten, Charles R, 1992. "Growth Accounting When Technical Change Is Embodied in Capital," American Economic Review, American Economic Association, vol. 82(4), pages 964-80, September. [Downloadable!] (restricted)
  2. W. Erwin Diewert, 2005. "Issues in the Measurement of Capital Services, Depreciation, Asset Price Changes, and Interest Rates," NBER Chapters, in: Measuring Capital in the New Economy, pages 479-556 National Bureau of Economic Research, Inc. [Downloadable!]
  3. W. Erwin Diewert, 2003. "Measuring Capital," NBER Working Papers 9526, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Diewert, W E, 1974. "Intertemporal Consumer Theory and the Demand for Durables," Econometrica, Econometric Society, vol. 42(3), pages 497-516, May. [Downloadable!] (restricted)
  5. Robert J. Hill & T. Peter Hill, 2003. "Expectations, Capital Gains, and Income," Economic Inquiry, Oxford University Press, vol. 41(4), pages 607-619, October. [Downloadable!] (restricted)
  6. Jorgenson, Dale W, 1996. "Empirical Studies of Depreciation," Economic Inquiry, Oxford University Press, vol. 34(1), pages 24-42, January.
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  7. Charles R. Hulten, 1992. "Growth Accounting When Technical Change is Embodied in Capital," NBER Working Papers 3971, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  8. Hulten, Charles R & Wykoff, Frank C, 1996. "Issues in the Measurement of Economic Depreciation: Introductory Remarks," Economic Inquiry, Oxford University Press, vol. 34(1), pages 10-23, January.
  9. W. Erwin Diewert, 1980. "Aggregation Problems in the Measurement of Capital," NBER Chapters, in: The Measurement of Capital, pages 433-538 National Bureau of Economic Research, Inc. [Downloadable!]
  10. Triplett, Jack E, 1996. "Depreciation in Production Analysis and in Income and Wealth Accounts: Resolution of an Old Debate," Economic Inquiry, Oxford University Press, vol. 34(1), pages 93-115, January.
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