Sensitivity of capital and MFP measurement to asset depreciation patterns and initial
capital stock estimates
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.
Available from January 09, 2023
In series:OECD Statistics Working Papersview more titles