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Measuring and Decomposing Capital Stock and Service Values: Should Capital Quality be given a Place?

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Abstract

Aggregation of tangible capital assets across vintages and decomposition of value aggregates into quantities and prices are considered. Focus is on both capital stock values and capital service values. If the definitions and ways of measuring prices and quantities are not conformable, a third component, denoted a quality component, may have to be included as a buffer. Should it then be suppressed by allocating it to either of the price and quantity components, or should quality be accounted for separately? In discussing these issues, five quantity variables and five price variables are involved. Some of them are observable from market data without large efforts, some are essentially unobservable, and some can be quantified only if certain (often non-testable) assumptions are made. Illustrations based on parametric functions are given.

Suggested Citation

  • Erik Biørn, 2007. "Measuring and Decomposing Capital Stock and Service Values: Should Capital Quality be given a Place?," Discussion Papers 518, Statistics Norway, Research Department.
  • Handle: RePEc:ssb:dispap:518
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    File URL: https://www.ssb.no/a/publikasjoner/pdf/DP/dp518.pdf
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    Keywords

    Capital measurement; Aggregation; Capital service price; Capital quality; Arbitrage; Neo-classical theory;

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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