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Measuring Capital - OECD Manual 2009

Second edition

image of Measuring Capital - OECD Manual 2009

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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Context, Purpose and Scope of the Manual

It may be helpful to briefly recall the role that capital plays in a stylised system of national accounts. This can easily be done with a circular flow diagram, as shown in the figure below. Flows of quantities of goods and services are matched by monetary flows. In the simplest case with only consumers and producers, the basic exchange is between labour (hours worked) and consumer products. These are exchanged in the markets for labour and for consumer products and give rise to revenues and costs for producers, and expenditure and labour income for consumers. The flow of labour into the producer’s sector and the flow of consumption goods out of it signal a production process whose analysis is central to many economic questions.

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