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Fixed capital stock depreciation in developing countries: Some evidence from firm level data

  • Yisheng Bu
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    Previous growth accounting studies suggest severe capital underutilisation and mismeasurement of the stocks of capital in some developing countries. Using the firm level data sets from the World Bank surveys, this paper estimates the economic depreciation rates of fixed capital stocks in the manufacturing industries of seven developing countries. The findings indicate that the stocks of fixed capital may depreciate at higher rates in these countries, as compared with the normal rates usually assumed for advanced industrial countries. This study also discusses the economic and social forces that may influence the incentive to maintain capital appropriately and the implications of high depreciation for the total factor productivity (TFP) growth estimates and volatility of capital accumulation.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/00220380600742183
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    Article provided by Taylor & Francis Journals in its journal Journal of Development Studies.

    Volume (Year): 42 (2006)
    Issue (Month): 5 ()
    Pages: 881-901

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    Handle: RePEc:taf:jdevst:v:42:y:2006:i:5:p:881-901
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    1. Becker, Gary S & Mulligan, Casey B, 1997. "The Endogenous Determination of Time Preference," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 729-58, August.
    2. Stephen D. Oliner, 1993. "New evidence on the retirement and depreciation of machine tools," Working Paper Series / Economic Activity Section 147, Board of Governors of the Federal Reserve System (U.S.).
    3. Shantayanan Devarajan & William R. Easterly & Howard Pack, 2002. "Low Investment is Not the Constraint on African Development," Working Papers 13, Center for Global Development.
    4. Easterly, William, 1999. "The ghost of financing gap: testing the growth model used in the international financial institutions," Journal of Development Economics, Elsevier, vol. 60(2), pages 423-438, December.
    5. Valerie A. Ramey & Matthew D. Shapiro, 2001. "Displaced Capital: A Study of Aerospace Plant Closings," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 958-992, October.
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