Depreciation in Production Analysis and in Income and Wealth Accounts: Resolution of an Old Debate

Abstract

In this article, I propose a resolution for the long‐standing controversy over depreciation. I develop, from capital theory, income and wealth accounting capital concepts and compare them with those from production analysis and productivity measurement. I conclude that depreciation in economic accounts is exactly the same measurement as in production analysis. As for empirical implications, market‐based measures of depreciation are appropriate for economic accounts, provided they are appropriate empirical measures of economic depreciation.

Capital Stocks, Capital Services and Multi-Factor Productivity Measures

“…The concept relates back to the work of Jorgenson and Griliches (1967) with further developments mainly in the productivity literature such as Jorgenson (1995), Hulten (1990), Triplett (1996Triplett ( , 1998, Hill (2000) and Diewert (2001).…”

La mesure du capital - Manuel de l'OCDE 2009

“…La définition générale de la CCF figure au chapitre 6 du Système de comptabilité nationale révisé de 1993 : Des explications complètes sur l'interprétation de l'amortissement figurent dans Triplett (1996). 4 Weitzman (1976) a été le premier, en partant d'un modèle, à établir un lien formel entre le produit intérieur net et le bien-être économique.…”

Growth Accounting

“…The one-hoss shay asset does, on the other hand, lose its value over time as the date of its retirement approaches. This value depreciation is a charge against income, not against the physical amount of capital, and to equate the two is to commit the Triplett (1996) fallacy (Hulten and Schreyer (2009)). 45 The output of the auto industry, for example, is observed to be the gross volume of the vehicles that emerge from the assembly line over a particular span of time (or their constant-price value).…”