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Depreciation, Deterioration and Obsolescence when there is Embodied or Disembodied Technical Change

  • Diewert, W. Erwin
  • Wykoff, Frank C.

The paper considers how to measure capital in a model where technical progress is either embodied in new units of capital or it is "disembodied" and simply causes the price of capital services to fall. The disembodied case is considered in sections 2-4. Sections 2 and 3 set out standard vintage capital aggregation models when there is no embodied technical progress. Section 4 discusses disembodied obsolescence in more detail. Section 5 introduces new (more efficient) models of the capital good so that technical progress is embodied in the new models. Section 6 shows how the parameters in the Jorgenson model of capital services could be estimated by statistical agencies if their investment surveys covered sales and retirements of used assets as well as purchases of new assets. Section 7 concludes.

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File URL: http://microeconomics.ca/erwin_diewert/final.pdf
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Paper provided by Vancouver School of Economics in its series Economics working papers with number diewert-06-11-23-08-38-56.

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Length: 31 pages
Date of creation: 23 Nov 2006
Date of revision: 13 Jul 2007
Handle: RePEc:ubc:bricol:diewert-06-11-23-08-38-56
Contact details of provider: Web page: http://www.economics.ubc.ca/

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  1. Hulten, Charles R, 1992. "Growth Accounting When Technical Change Is Embodied in Capital," American Economic Review, American Economic Association, vol. 82(4), pages 964-80, September.
  2. Charles R. Hulten, 1992. "Growth Accounting When Technical Change is Embodied in Capital," NBER Working Papers 3971, National Bureau of Economic Research, Inc.
  3. Triplett, Jack E, 1996. "Depreciation in Production Analysis and in Income and Wealth Accounts: Resolution of an Old Debate," Economic Inquiry, Western Economic Association International, vol. 34(1), pages 93-115, January.
  4. W. Erwin Diewert, 1980. "Aggregation Problems in the Measurement of Capital," NBER Chapters, in: The Measurement of Capital, pages 433-538 National Bureau of Economic Research, Inc.
  5. 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.
  6. Diewert, W E, 1974. "Intertemporal Consumer Theory and the Demand for Durables," Econometrica, Econometric Society, vol. 42(3), pages 497-516, May.
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