Capital Obsolescence, Growth Accounting and Total Factor Productivity
The stability of capital lifespan over time is a key assumption of growth accounting studies. However, many empirical works refute this hypothesis and suggest that the average service-life of capital goods has shown a decrease in the advanced economies since the 1970s. I show in this paper that this acceleration in capital obsolescence could strongly impact on traditional measures of Total Factor Productivity. For instance, a moderate increase in the capital retirement rate since the early 1970s could explain almost all the productivity slowdown observed in the US economy in the period 1974-2000. JEL Classification: C80, E17, O47.
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- repec:sae:niesru:v:147:y::i:1:p:84-96 is not listed on IDEAS
- Martin Neil Baily & Robert J. Gordon, 1988. "The Productivity Slowdown, Measurement Issues, and the Explosion of Computer Power," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(2), pages 347-432.
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