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A Method for Improved Capital Measurement by Combining Accounts and Firm Investment Data. A revised version

We propose a new method for estimating capital stocks at the firm level by combining business accounts information and investment data. The method also produces capital estimates at the sector or industry level by summing individual firms' capital stocks and appropriately inflating this sum to account for firms with missing data. Our approach has two major advantages compared with the much used Perpetual Inventory Method (PIM). First, long investment series are not necessary. Second, sector capital estimates are automatically adjusted for changes in the capital stock because of entry and exit of firms. While capital growth rates in Norwegian manufacturing were only 1 percent on average during 1993--2004 according to national accounts figures, our method yields much higher growth rates of 5.5 percent on average.

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Paper provided by Statistics Norway, Research Department in its series Discussion Papers with number 365.

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Date of creation: Apr 2007
Date of revision:
Handle: RePEc:ssb:dispap:365
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  1. Hulten, Charles R & Wykoff, Frank C, 1996. "Issues in the Measurement of Economic Depreciation: Introductory Remarks," Economic Inquiry, Western Economic Association International, vol. 34(1), pages 10-23, January.
  2. Ellen R. McGrattan & James A. Schmitz, 1999. "Maintenance and repair: too big to ignore," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 2-13.
  3. Tor Jakob Klette & Zvi Griliches, 1994. "The Inconsistency of Common Scales Estimators when Output Prices are Unobserved and Endogenous," Discussion Papers 127, Statistics Norway, Research Department.
  4. Diewert, W E, 1980. "Capital and the Theory of Productivity Measurement," American Economic Review, American Economic Association, vol. 70(2), pages 260-67, May.
  5. Hulten, Charles R. & Wykoff, Frank C., 1981. "The estimation of economic depreciation using vintage asset prices : An application of the Box-Cox power transformation," Journal of Econometrics, Elsevier, vol. 15(3), pages 367-396, April.
  6. Hicks, John R, 1974. "Capital Controversies: Ancient and Modern," American Economic Review, American Economic Association, vol. 64(2), pages 307-16, May.
  7. Jorgenson, D.W., 1994. "Empirical Studies of Depriciation," Harvard Institute of Economic Research Working Papers 1704, Harvard - Institute of Economic Research.
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