A Study On Weighted Investment Vintages

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Once the time series of investment has been derived, weights reflecting the age-efficiency profile are attached to each vintage. The weighted investment vintages are added together to give NCS. The dissertation assumes a geometric age-price profile, following Beidleman (1976) and Oliner (1996) who have shown its suitability for machine tools: "δ=" "DBR" /"T" The DBR used is 1.65, derived for metalworking machinery by Hulten and Wykoff (1981). NCS of asset type i at the end of period t "K" _"i,t" is written: "K" _"i,t" "=" "I" _"i,1935" "+" ∑_"t=1935" ^"t=1940" ▒〖("1-" "δ" _"i" ) "K" _"i,t-1" 〗 The benchmark year used is 1935 and calculated using weights from their 1935 historical cost capital stock . The weights and benchmark stocks are shown below in Table 4. One may object to the benchmark year used on the grounds that the economy did not reach full capacity until 1942, but using 1940 or 1942 would distort estimates with wartime investment. When geometric rates are used age-price and age-efficiency profiles coincide and therefore, as do PCS and NCS. ‘Sensitivity’ studies can gauge the effects of errors within the PIM model. Statistics of Canada found upward revisions had differing effects depending on the period. From 1950 to 1970 reducing the service lives increased capital stock growth rates. O’Mahony (1993) examines the sensitivity of net capital stocks to changes in service lives using straight-line depreciation. It was found that in 1989 both net and gross

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