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Capital Stock and Depreciation: Theory and an Empirical Application

Author

Listed:
  • F. J. Escribá-Pérez

    () (Department of Economic Analysis, Universitat de València (Spain))

  • M. J. Murgui-García

    () (Department of Economic Analysis, Universitat de València (Spain))

  • J. R. Ruiz-Tamarit

    () (Department of Economic Analysis, Universitat de València (Spain))

Abstract

There are many puzzles and unresolved problems in empirical economics that depend on the reliability of the productive capital series. Some macroeconomic topics and questions cannot be addressed correctly or answered with the available standard statistical measures of capital stock. We make an innovative contribution to the theory of capital together with an exercise that quantifies the depreciation rate and the capital stock for the U.S. economy. An intertemporal optimization model with adjustment and maintenance costs, gives us the algorithm and the corresponding economic estimation of capital deterioration and obsolescence. Our measures are based on profitability and the Tobin’s q ratio.

Suggested Citation

  • F. J. Escribá-Pérez & M. J. Murgui-García & J. R. Ruiz-Tamarit, 2019. "Capital Stock and Depreciation: Theory and an Empirical Application," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2019004, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  • Handle: RePEc:ctl:louvir:2019004
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    File URL: https://sites.uclouvain.be/econ/DP/IRES/2019004.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Capacity Utilization; Capital; Depreciation; Maintenance; Obsolescence; Tobin’s q;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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