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

  • Diewert, Erwin
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    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.

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    Paper provided by Vancouver School of Economics in its series Economics working papers with number erwin_diewert-2009-57.

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    Length: 11 pages
    Date of creation: 27 Oct 2009
    Date of revision: 27 Oct 2009
    Handle: RePEc:ubc:bricol:erwin_diewert-2009-57
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    1. Diewert, W E, 1992. "The Measurement of Productivity," Bulletin of Economic Research, Wiley Blackwell, vol. 44(3), pages 163-98, July.
    2. 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.
    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 659-79, September.
    4. W. Erwin Diewert & Ann Marie Smith, 1994. "Productivity Measurement for a Distribution Firm," NBER Working Papers 4812, National Bureau of Economic Research, Inc.
    5. 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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