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Measuring Capital – OECD Manual SECOND EDITION AVI A LABLE ON LINE 2009 Measuring Capital – OECD Manual SECOND EDITION Capital – in particular of the physical sort – plays several roles in economic life: it constitutes wealth and it provides services in production processes. Capital is invested, disinvested and it depreciates and becomes obsolescent and there is a question how to measure all these dimensions of capital in industry and national accounts. The present revised Capital Manual is the first comprehensive guide to the approaches toward capital measurement. It is directed at statisticians, researchers and analysts and aims at giving practical advice while providing theoretical background and an overview of the relevant literature. The manual comes in three parts – a first part with a non-technical description with the main concepts and steps involved in measuring capital; a second part directed at implementation and a third part outlining theory and a more complete mathematical formulation of the measurement process. Measuring Capital OECD Manual SECOND EDITION Measuring Capital – OECD Manual Manual MeasuringOECD Capital– SECONDEDITION The full text of this book is available on line via these links: www.sourceoecd.org/generaleconomics/9789264025639 www.sourceoecd.org/statisticssourcesmethods/9789264025639 Those with access to all OECD books on line should use this link: www.sourceoecd.org/9789264025639 SourceOECD is the OECD’s online library of books, periodicals and statistical databases. For more information about this award-winning service and free trials ask your librarian, or write to us at [email protected]. 2009 isBN 978-92-64-02563-9 30 2009 12 1 P www.oecd.org/publishing -:HSTCQE=UWZ[X^: 2009 302009121cov.indd 1 25-Aug-2009 1:41:54 PM Measuring Capital OECD MANUAL 2009 Second Edition ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT The OECD is a unique forum where the governments of 30 democracies work together to address the economic, social and environmental challenges of globalisation. The OECD is also at the forefront of efforts to understand and to help governments respond to new developments and concerns, such as corporate governance, the information economy and the challenges of an ageing population. The Organisation provides a setting where governments can compare policy experiences, seek answers to common problems, identify good practice and work to co-ordinate domestic and international policies. The OECD member countries are: Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The Commission of the European Communities takes part in the work of the OECD. OECD Publishing disseminates widely the results of the Organisation’s statistics gathering and research on economic, social and environmental issues, as well as the conventions, guidelines and standards agreed by its members. This work is published on the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the Organisation or of the governments of its member countries. Publié en français sous le titre : La mesure du capital MANUEL DE L’OCDE 2009 Seconde édition Corrigenda to OECD publications may be found on line at: www.oecd.org/publishing/corrigenda. © OECD 2009 You can copy, download or print OECD content for your own use, and you can include excerpts from OECD publications, databases and multimedia products in your own documents, presentations, blogs, websites and teaching materials, provided that suitable acknowledgment of OECD as source and copyright owner is given. All requests for public or commercial use and translation rights should be submitted to [email protected]. Requests for permission to photocopy portions of this material for public or commercial use shall be addressed directly to the Copyright Clearance Center (CCC) at [email protected] or the Centre français d'exploitation du droit de copie (CFC) [email protected]. TABLE OF CONTENTS Table of contents Preface . 9 Acknowledgements . 10 Executive summary . 11 Chapter 1. Context, Purpose and Scope of the Manual . 15 1.1. The role of capital measurement . 16 1.2. Purpose of this Manual . 18 1.3. What the Manual does not cover . 18 Part I Capital Stocks and Capital Services – Concepts Chapter 2. Introduction . 23 Chapter 3. How asset values are determined . 29 3.1. Concept . .30 3.2. Relationship between capital service and asset prices for a single asset – a numerical example . 32 Notes . 36 Chapter 4. Asset Retirement and the Gross Capital Stock . 37 4.1. Gross capital stock . 38 4.2. Retirement profile and asset lives . 38 4.3. Combined age-efficiency/retirement profiles . 41 Chapter 5. Depreciation or Consumption of Fixed Capital . 43 5.1. Concept and scope . 44 5.2. Measuring depreciation . 46 5.3. Price and volume of depreciation . 49 5.4. Depreciation and obsolescence . 49 5.5. Determining depreciation parameters . 51 Notes . 52 Chapter 6. Net (“Wealth”) Capital Stock . 55 6.1. Concept . .56 6.2. Measurement . 56 Chapter 7. Productive Stock and Capital Services . 59 7.1. Concept . .60 7.2. Computing productive stocks . 60 Notes . 62 MEASURING CAPITAL: OECD MANUAL 2009 – ISBN 978-92-64-02563-9 – © OECD 2009 3 TABLE OF CONTENTS Chapter 8. User Costs . 63 8.1. Concept . .64 8.2. Interpreting and measuring user costs . 64 8.3. Rates of return – conceptual considerations . 66 8.4. Revaluation – conceptual considerations . 75 Notes . 76 Part II Measuring Capital Stocks and Capital Services – Implementation Chapter 9. Scope of Capital Measurement and Classifications . 81 9.1. Scope . 82 9.2. Classifications . 83 Chapter 10. The Perpetual Inventory Method – Overview . 87 Chapter 11. Age-efficiency Profiles . 91 11.1. Deriving age-efficiency profiles from depreciation profiles . 93 Note . 93 Chapter 12. Age-price and Depreciation Profiles . 95 12.1. Functional forms of the depreciation pattern . 96 12.2. Empirical estimates of age-price profiles from used asset prices . 97 12.3. Deriving depreciation profiles from age-efficiency profiles . 102 12.4. Production function approach . 102 Notes . 103 Chapter 13. Service Lives and Retirement of Assets . 105 13.1. Service lives of assets . 106 13.2. Retirement patterns . 114 13.3. Integrating retirement patterns with age-efficiency and age-price profiles . 118 Notes . 121 Chapter 14. Gross Fixed Capital Formation . 123 Chapter 15. Computing Net, Gross and Productive Capital Stocks and Depreciation . 127 15.1. Annual frequency . 128 15.2. Depreciation (consumption of fixed capital) . 128 15.3. Net capital stocks . 129 15.4. Productive stocks . 129 15.5. Gross capital stocks . 129 15.6. Sub-annual frequency . ..
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