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Appreciating depreciation: physical capital depreciation in a developing country

  • Matthias Schündeln

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    Little is known about the nature of physical capital in the less-developed countries. This article addresses the lack of empirical study related to depreciation rates, which are a neglected but important ingredient of both micro and macro models and empirical analyses. Based on rich establishment-level survey data, and using a straightforward econometric approach, I estimate depreciation rates of physical capital invested in manufacturing enterprises in Indonesia. I estimate the depreciation rate to be between 8 and 14 %. These numbers compare roughly to published estimates for the U.S. I then investigate hypotheses related to heterogeneity of depreciation rates across different types of firms. Finally, I test the hypothesis that financially constrained firms use less durable investment goods. Copyright Springer-Verlag 2013

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    File URL: http://hdl.handle.net/10.1007/s00181-012-0592-2
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    Article provided by Springer in its journal Empirical Economics.

    Volume (Year): 44 (2013)
    Issue (Month): 3 (June)
    Pages: 1277-1290

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    Handle: RePEc:spr:empeco:v:44:y:2013:i:3:p:1277-1290
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