Productivity Races II: The Issue of Capital Measurement
This paper explores the role of capital measurement in determining the productivity of individual textile plants. In addition to gross book value of capital, we experiment with a perpetual inventory measure of capital and implicit (estimated) deflator associated with the age of the plant. Following the methodology of the earlier paper (Productivity Races I), we find that measures of productivity constructed from different measures of capital are highly correlated. Further, their association with alternative measures of economic performance is approximately the same. Nevertheless, the perpetual inventory measure of capital -- the most desirable measure from a theoretical perspective -- does consistently outperform the other two measures.
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- Cabalero, R.J., 1997.
97-20, Massachusetts Institute of Technology (MIT), Department of Economics.
- Douglas W Dwyer, 1995. "Technology Locks, Creative Destruction And Non-Convergence In Productivity Levels," Working Papers 95-6, Center for Economic Studies, U.S. Census Bureau.
- Douglas W Dwyer, 1996. "ARE FIXED EFFECTS FIXED? Persistence in Plant Level Productivity," Working Papers 96-3, Center for Economic Studies, U.S. Census Bureau.
- Douglas W Dwyer, 1995. "Whittling Away At Productivity Dispersion," Working Papers 95-5, Center for Economic Studies, U.S. Census Bureau.
- Ricardo J. Caballero & Eduardo M. R. A. Engel & John C. Haltiwanger, 1995. "Plant-Level Adjustment and Aggregate Investment Dynamics," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(2), pages 1-54.
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