Capital Services and Total Factor Productivity Measure- ments: Impact of Various Methodologies for Belgium Bernadette Biatour,
[email protected], Geert Bryon,
[email protected], Chantal Kegels,
[email protected] Federaal Planbureau March 2007 Abstract This Working Paper presents the different methodologies currently used to construct a volume index of capital services and analyzes the effects of methodological changes on capital services and total factor productivity estimates for Belgium over the period 1970-2004. The measure- ment of capital services is realized in two steps. First, productive capital stocks have to be esti- mated for each type of asset. Two methodologies are generally used: the geometric and the hy- perbolic profile. Secondly, these stocks are aggregated, using the user costs of capital (ex-ante or ex-post approach) as weights to derive an overall index. For the economy as a whole and the entire period, under an ex-post approach, the volume indices of capital services estimated with a hyperbolic age-efficiency profile grow at a higher rate than the indices estimated with a geomet- ric profile. This general conclusion is, however, not observed in every sector. Under an ex-ante approach, the different volume indices are quite similar for the whole economy, even if the indi- ces grow generally at a slightly higher rate in the case of a geometric pattern. A higher growth rate of the volume indices generates a higher capital contribution and, consequently, a lower tfp contribution. Over long periods of time, the different tfp estimates are relatively similar. Over shorter periods, the different methodologies generate more significant variations in the tfp con- tribution.