Endogenous capital stock and depreciation in the United States

Abstract

There are several puzzles and unresolved problems in empirical economics that depend on the reliability of capital series. Productivity paradoxes, and certain recent trends in the US macroeconomic data, cannot be addressed correctly with the available standard measures of capital stock. Our paper contributes to the theory of capital by endogenizing capacity utilization and depreciation in an intertemporal optimization model with adjustment and maintenance costs. This model allows for corporate taxation and identifies the impact on the variables that shape the capital accumulation process. Depreciation is a control variable that is no longer assumed proportional to the capital stock. The model provides a system of equations that we run empirically with a data set of the US economy for the period 1960–2016. We obtain an empirical measure of the depreciation rate and the capital stock based on profitability and market values. They are economic estimations that consider the entire capital deterioration and obsolescence. Aggregate capital stock is a key variable in the description of the economy, and our results, which better fit the foundations of economic theory, can provide policymakers with a good understanding of the field in which specific public policy measures are to be implemented.

Economic resilience and the dynamics of capital stock

“…In fact, we abstract from any other capital and focus on the stock of private and productive physical capital. 7 The database with the series used in this paper is available in Escribá-Pérez et al (2018, 2022, 2023. Our empirical analysis is based on the USA and Spanish data for the series of gross investment, depreciation, and capital stock.…”

Accounting for Obsolescence in Providing Company Capital Preservation

“…The topic of obsolescence had been an important subject of research both in the industrial and post-industrial period of economic development. Many studies (including Boucekkine, del Rio, & Martinez, 2009;Diewert & Wykoff, 2006;Escribá-Pérez, Murgui-García, & Ruiz-Tamarit, 2019;Freeman, 2009;Gort & Wall, 1998;Hill, 1999;Musso, 2006;Oulton, 1995) consider the concepts of depreciation and obsolescence as important variables for capital measurement in the system of national economic accounts, and highlight the problems of obsolescence recognition and measurement. The general issues of the nature, economic impact, features and types of capital depreciation and obsolescence were also investigated by Michalchyk (2005), Illyashenko and Livatska (2007), and Yefimenko (2010) among others.…”

Optimal Sovereign Debt Relief and Exclusion with Unobservable Physical Capital

“…As standardization is not yet widespread, questions may arise on the reliability of capital stock estimates. It is argued that a country, especially if less developed, might incorrectly estimate capital accumulation due to problems with raw data availability, measurement, and recording (see for example, Blavy, 2006;Escribá-Pérez et al, 2023). Thus, one of the merits of our approach is in providing a new framework for scrutinizing sovereign-debt decisions in the absence of information on capital stock.…”