Progress in Measuring the Price and Quantity of Capital

Abstract

The fundamentals of capital measurement for production function and productivity estimation were laid out by Zvi Griliches (1963) over 35 years ago. This theory, which lays out the relationships between asset prices, rental prices, depreciation and the relative efficiencies of vintages of durable inputs, has been refined and extended by a large number of authors, including Jorgenson and Griliches (1967)(1972), Christensen and Jorgenson (1969)(1970), Jorgenson (1973)(1989)(1996), Diewert (1980), Hulten and Wykoff (1981a)(1981b)(1996), Hulten (1990)(1996) and Triplett (1996). Unfortunately, the United Nations (1993) System of National Accounts has not yet incorporated this well established theory into its production accounts, partly because the SNA regards interest as an income transfer rather than being a productive reward for postponing consumption and partly because capital gains are also regarded as being unproductive. Thus from some points of view, there has been little official progress in measuring the price and quantity of capital in a form that would be suitable for production and productivity accounts.

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