Measuring Capital - OECD Manual 2009

Second edition

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Capital - in particular of the physical sort - plays several roles in economic life: it constitutes wealth and it it provides services in production processes. Capital is invested, disinvested and it depreciates and becomes obsolescent and there is a question how to measure all these dimensions of capital in industry and national accounts. This revised Capital Manual is a comprehensive guide to the approaches toward capital measurement. It gives statisticians, researchers and analysts practical advice while providing theoretical background and an overview of the relevant literature. The manual comes in three parts - a first part with a non-technical description with the main concepts and steps involved in measuring capital; a second part directed at implementation and a third part outlining theory and a more complete mathematical formulation of the measurement process.

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Aggregation Across Assets and Industries

To this point, most of the discussion has been conducted with reference to a single (type of) asset. Many concepts are indeed best conveyed in this manner but aggregation plays an important role in how the concepts of productive stock, capital services, net stock and capital composition translate into measurement.

The single most important point in this context is that it is the process of aggregation that essentially shapes the difference between capital services and the net or wealth capital stock. At the level of individual assets, the productive stock may differ from the net capital stock but not necessarily so. The most important case where the two measures coincide is in the presence of constant, geometric rates of depreciation which imply the same rates of efficiency decline and hence identity between productive and net stock at the asset level. However, for all types of age-efficiency and age-price profiles, when the productive stock is multiplied through by an expression for unit user costs, a difference arises between the value of the net stock and the value of capital services. This difference carries through in the aggregation across types of assets, because aggregation weights differ in the two cases.

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