Fixed Capital Estimation: Utilization of Macro Data to Account for Capital Heterogeneity at Firm Level

Abstract

Reliable figures for fixed capital are crucial for studies of production and costs characteristics, but they are often unavailable in firm data. In this paper, we demonstrate how macroeconomic data sources may be exploited to account for heterogeneity in fixed capital estimation with firm data. To address the impact of fixed capital heterogeneity, we estimate fixed capital by perpetual inventory method and book adjustments, both applying aggregate and disaggregate capital deflators and depreciation rates. Our capital estimations suggest that use of aggregate capital deflators, aggregate capital depreciation rates and direct measurement rather than the perpetual inventory model implies a misjudgment of capital composition and an underestimation of aggregate capital value over time. Many of the differences between the perpetual inventory model and direct measurement are less prevalent, when capital services are applied as capital measure rather than capital stock.

Fixed Capital Estimation: Utilization of Macro Data to Account for Capital Heterogeneity at Firm Level