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A METHOD FOR IMPROVED CAPITAL MEASUREMENT BY COMBINING ACCOUNTS AND FIRM INVESTMENT DATA
Author(s) -
Raknerud Arvid,
Rønningen Dag,
Skjerpen Terje
Publication year - 2007
Publication title -
review of income and wealth
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.024
H-Index - 57
eISSN - 1475-4991
pISSN - 0034-6586
DOI - 10.1111/j.1475-4991.2007.00241.x
Subject(s) - economics , fixed investment , investment (military) , capital (architecture) , fixed capital , cost of capital , capital intensity , physical capital , capital formation , norwegian , national accounts , inventory investment , econometrics , monetary economics , financial capital , macroeconomics , microeconomics , market economy , profit (economics) , linguistics , philosophy , archaeology , politics , political science , law , history , human capital
We propose a new method for estimating capital stocks at the firm level by combining business accounts information and investment data. The method also produces capital estimates at the sector or industry level by summing individual firms' capital stocks and appropriately inflating this sum to account for firms not included in the data set. Our approach has two major advantages compared with the much used Perpetual Inventory Method (PIM). First, long investment series are not necessary. Second, sector capital estimates are automatically adjusted for changes in the capital stock because of entry and exit of firms. While capital growth rates in Norwegian manufacturing were only 1 percent on average during 1993–2004 according to national accounts figures, our method yields much higher growth rates of 5.5 percent on average.