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On The Econometric Estimation Of A Variable Rate Of Depreciation

Author

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  • Ignacio Mauleón

    (Universidad Rey Juan Carlos)

  • José A. Hernández

    (Universidad de Las Palmas de Gran Canaria)

Abstract

Measuring the capital stock is crucial in some fields of economic research. Capital stock is not observable, and its estimation requires the knowledge of its rate of depreciation. In most of the cases, econometric is not used for this task. However this methodology is adecuate to generate measures consistent with its productivity and the technology of the economy. If we assume that the depreciation rate is not constant, its estimation poses some technical difficulties. In principle, it is not possible to use standard econometric packages. In this note we suggest two estimation methods of a variable rate of depreciation which are easily implementable in standard packages by means of NLS or ML. The formalization of these methods and empirical evidence on its implementation is shown.

Suggested Citation

  • Ignacio Mauleón & José A. Hernández, 2002. "On The Econometric Estimation Of A Variable Rate Of Depreciation," Working Papers. Serie AD 2002-07, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:2002-07
    as

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    References listed on IDEAS

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    3. Nadiri, M Ishaq & Prucha, Ingmar R, 1996. "Estimation of the Depreciation Rate of Physical and R&D Capital in the U.S. Total Manufacturing Sector," Economic Inquiry, Western Economic Association International, vol. 34(1), pages 43-56, January.
    4. Charles R. Hulten, 1991. "The Measurement of Capital," NBER Chapters, in: Fifty Years of Economic Measurement: The Jubilee of the Conference on Research in Income and Wealth, pages 119-158, National Bureau of Economic Research, Inc.
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