The vintage effect in TFP-growth: An analysis of the age structure of capital
AbstractThe age structure of capital plays an important role in the measurement of productivity. It has been argued that the slowdown in the 1970?s can be ascribed to the aging of the stock of capital. In this paper we incorporate the age structure in productivity measurement. Our final proposition shows that inclusion of the vintage effect prompts an upward correction of measured productivity growth in times of an aging stock of capital. Here capital ages if the investment/capital ratio falls short of the inverse of the capital age, as a first proposition shows. The analysis rests on a rigorous accounting for vintages. We translate the Bureau of Economic Analysis? age of capital data into a measure of rates of obsolescence. Empirically, the correction of productivity growth for the vintage effect requires an estimate of the obsolescence and depreciation parameters on the basis of age data. The results indicate that the use of capital stock in efficiency units does cause some smoothing of Total Factor Productivity growth over time and does ameliorate somewhat the measured productivity slowdown of the 1970s.
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Bibliographic InfoPaper provided by European Regional Science Association in its series ERSA conference papers with number ersa03p11.
Date of creation: Aug 2003
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Other versions of this item:
- Gittleman, Maury & ten Raa, Thijs & Wolff, Edward N., 2006. "The vintage effect in TFP-growth: An analysis of the age structure of capital," Structural Change and Economic Dynamics, Elsevier, vol. 17(3), pages 306-328, September.
- Maury Gittleman & Thijs ten Raa & Edward N. Wolff, 2003. "The Vintage Effect in TFP Growth: An Analysis of the Age Structure of Capital," NBER Working Papers 9768, National Bureau of Economic Research, Inc.
- O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
- O51 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-02-29 (All new papers)
- NEP-GEO-2004-02-29 (Economic Geography)
- NEP-INO-2004-02-29 (Innovation)
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