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Can A Perpetual Inventory Capital Stock Be Used For Production Function Parameter Estimation?

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  • Edward Miller

Abstract

Due to lack of data on capital disappearance, we simply do not know the covariance of the capital stock with factor inputs and prices well enough to estimate production function parameters. Since replacement rates are rational economic decisions, the errors in a perpetual inventory capital stock vary systematically with the business cycle and such economic variables as rates of technical progress and interest rates. This introduces systematic errors into calculated parameters of production functions and rates of technical progress.

Suggested Citation

  • Edward Miller, 1990. "Can A Perpetual Inventory Capital Stock Be Used For Production Function Parameter Estimation?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 36(1), pages 67-82, March.
    • Handle: RePEc:bla:revinw:v:36:y:1990:i:1:p:67-82
    DOI: 10.1111/j.1475-4991.1990.tb00262.x
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    Cited by:

    1. Mulligan, Robert F., 2013. "New evidence on the structure of production: Real and Austrian business cycle theory and the financial instability hypothesis," Journal of Economic Behavior & Organization, Elsevier, vol. 86(C), pages 67-77.
    2. Bitros, George C., 2009. "The Theorem of Proportionality in Mainstream Capital Theory: An Assessment of its Conceptual Foundations," MPRA Paper 17436, University Library of Munich, Germany.
    3. Ouyang, Puman & Fu, Shihe, 2012. "Economic growth, local industrial development and inter-regional spillovers from foreign direct investment: Evidence from China," China Economic Review, Elsevier, vol. 23(2), pages 445-460.
    4. Gutierrez, Pedro J. & Marroquin, Eduardo F., 2006. "A Characterization of the Argentinian production sector prior to the 1998 crisis," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 35(4), pages 691-709, August.

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