The theorem of proportionality in contemporary capital theory: An assessment of its conceptual foundations

Bitros, George C.

doi:10.1007/s11138-010-0122-4

Cited by 2 publications

(1 citation statement)

References 103 publications

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“…The lack of a unified theory of capital depreciation has been compensated for years by the results of two main but separate branches of economic research (Bitros, 2010a(Bitros, , 2010b. The first uses the vintage capital model as a natural instrument and focuses on the study of obsolescence (Boucekkine et al, 2008;Johansen, 1959;Malcomson, 1975;Mukoyama, 2008).…”

Section: Introductionmentioning

confidence: 99%

Endogenous capital stock and depreciation in the United States

Escribá-Pérez

Murgui-García

Ruiz-Tamarit

2022

J Public Economic Theory

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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.

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