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Capital as factor of production

Capital as a Factor of Production in OECD Agriculture: Measurement and Data

Saturday 12 May 2007, by Carlos San Juan


This paper provides a farm sector comparison of levels of capital input for fourteen OECD countries for the period 1973-2002. The starting point for construction of a measure of capital input is the measurement of capital stock. Estimates of depreciable capital are derived by representing capital stock at each point of time as a weighted sum of past investments.

The weights correspond to the relative efficiencies of capital goods of different ages, so that the weighted components of capital stock have the same efficiency. Estimates of the stock of land are derived from balance sheet data. We convert estimates of capital stock into estimates of capital service flows by means of capital rental prices.

Comparisons of levels of capital input among countries require data on relative prices of capital input. We obtain relative price levels for capital input via relative investment goods prices, taking into account the flow of capital input per unit of capital stock in each country.

Capital as a Factor of Production in OECD Agriculture: Measurement and Data

1. Introduction This paper provides a comparison of levels of capital input in agriculture for fourteen OECD countries for the period 1973-2002.1 Measures of capital input are necessary for a description of technology in agriculture. In a subsequent paper, we integrate these estimates into production accounts for agriculture, including real output and real factor input. We apply the resulting measures of real product and real factor input to the study of total factor productivity and international competitiveness.

The starting point for construction of a measure of capital input is the measurement of capital stock. Estimates of depreciable capital are derived by representing capital stock at each point of time as a weighted sum of past investments.2 The weights correspond to the relative efficiencies of capital goods of different ages, so that the weighted components of capital stock have the same efficiency. To estimate the stock of land in each country, we construct time series price indexes of land in farms. The stock of land is then constructed implicitly as the ratio of the value of land in farms to the time series price index.

The next step in developing measures of capital input is to construct estimates of prices of capital services. For each asset the price of investment goods is a weighted sum of future service or rental prices, discounted by a factor that incorporates future rates of return. The weights are given by the relative efficiencies of capital goods of different ages. Our estimates of capital input incorporate the same data on relative efficiencies of capital goods into estimates of both capital stock and capital rental prices, so that the requirement for internal consistency of measures of capital input is met.

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