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Sensitivity of capital and MFP measurement to asset depreciation patterns and initial capital stock estimates

Author

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  • Pierre-Alain Pionnier
  • María Belén Zinni
  • Kéa Baret

Abstract

This paper discusses the sensitivity of capital and multifactor productivity (MFP) measurement to asset depreciation patterns and initial capital stock estimates. Applying the same depreciation rates in the US as in other G7 countries would reduce the US net investment rate and net capital stock by up to one third and increase US GDP by up to 0.5%. Capital and MFP growth would be less affected. Estimating initial capital stocks often involves assuming constant investment growth, but this leads to unreliable results. Relying on average K/Y ratios across countries works well for the US, but this might not be the case for other countries due to the international dispersion in K/Y ratios. Two main recommendations for statistical agencies emerge from this analysis. First, they should regularly review asset depreciation patterns to ensure that measured differences across countries are well justified. Second, they should backcast investment series as much as possible before relying on stationarity assumptions to estimate initial capital stocks.

Suggested Citation

  • Pierre-Alain Pionnier & María Belén Zinni & Kéa Baret, 2023. "Sensitivity of capital and MFP measurement to asset depreciation patterns and initial capital stock estimates," OECD Statistics Working Papers 2023/01, OECD Publishing.
    • Handle: RePEc:oec:stdaaa:2023/01-en
    DOI: 10.1787/92498395-en
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    Cited by:

    1. Reitze Gouma & Robert Inklaar, 2023. "Capital Measurement and Productivity Growth Across International Databases," International Productivity Monitor, Centre for the Study of Living Standards, vol. 44, pages 67-88, Fall.

    More about this item

    Keywords

    asset depreciation; capital services; capital stock; multifactor productivity; national accounts;
    All these keywords.

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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