NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Thijs ten Raa

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Working Papers

June 2003The Vintage Effect in TFP Growth: An Analysis of the Age Structure of Capital
with Maury Gittleman, Edward N. Wolff: w9768
The age structure of capital plays an important role in the measurement of productivity. It has been argued that the slowdown in the 1970's can be ascribed to the aging of the stock of capital. In this paper we incorporate the age structure in productivity measurement. A proposition proves that Nelson's (1964) formula is wrong. Our final proposition shows that inclusion of the vintage effect prompts an upward correction of measured productivity growth in times of an aging stock of capital. Here capital ages if the investment/capital ratio falls short of the inverse of the capital age, as a first proposition shows. The analysis rests on a rigorous accounting for vintages. We translate the Bureau of Economic Analysis' age of capital data into a measure of rates of obsolescence. Empiric...

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