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User Costs versus Waiting Services and Depreciation in a Model of Production


  • Diewert, Erwin


The paper develops an extension of a one period model of production involving beginning and end of the period capital stocks along with output and input flows that is due to Hicks and Edwards and Bell. This generalized Austrian model of production takes into account that end of the period capital stocks result from: (i) purchases of new investment goods; (ii) internal construction of firm capital stock components and (iii) holdings of (depreciated) capital goods that were held by the firm at the beginning of the period. These different methods of creating end of period holdings of capital stocks generally have different resource requirements and hence the one period production possibilities set is more complex than the usual one. This general model of production is used to justify the decomposition of the Jorgensonian user cost of capital into separate waiting services and depreciation components.

Suggested Citation

  • Diewert, Erwin, 2009. "User Costs versus Waiting Services and Depreciation in a Model of Production," Economics working papers erwin_diewert-2009-57, Vancouver School of Economics, revised 27 Oct 2009.
  • Handle: RePEc:ubc:bricol:erwin_diewert-2009-57

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    References listed on IDEAS

    1. Diewert, W E, 1974. "Intertemporal Consumer Theory and the Demand for Durables," Econometrica, Econometric Society, vol. 42(3), pages 497-516, May.
    2. W. Erwin Diewert & Ann Marie Smith, 1994. "Productivity Measurement for a Distribution Firm," NBER Working Papers 4812, National Bureau of Economic Research, Inc.
    3. Diewart, W Erwin & Morrison, Catherine J, 1986. "Adjusting Output and Productivity Indexes for Changes in the Terms of Trade," Economic Journal, Royal Economic Society, vol. 96(383), pages 659-679, September.
    4. Diewert, W E, 1992. "The Measurement of Productivity," Bulletin of Economic Research, Wiley Blackwell, vol. 44(3), pages 163-198, July.
    5. Rymes, T K, 1983. "More on the Measurement of Total Factor Productivity," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 29(3), pages 297-316, September.
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    More about this item


    Production theory; user cost of capital; waiting services; depreciation; Austrian models of production; net versus gross investment;

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