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Evidence that Capital Formation is Over-Estimated in ICP 2011

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  • Theodore R. Breton

Abstract

Using the ICP 2011’s cross-country data on input prices and project cost shares, I show that the construction prices in ICP 2011 are substantially underestimated in low and middle income countries. As a consequence, the PPP-adjusted construction in these countries is overestimated on average by about 100% and gross fixed capital formation as a share of GDP is overestimated by 25-30%. I also examine the ICP 2005 construction prices and show that there are similar problems with the ICP 2005 data.

Suggested Citation

  • Theodore R. Breton, 2015. "Evidence that Capital Formation is Over-Estimated in ICP 2011," Documentos de Trabajo de Valor Público 13332, Universidad EAFIT.
    • Handle: RePEc:col:000122:013332
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    File URL: http://hdl.handle.net/10784/5508
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    More about this item

    Keywords

    ICP 2011; ICP 2005; construction prices; PPP; construction data; capital data;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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