The Role of Fixed Capital Depreciation for TFP Growth

The theoretical foundations for the measurement as well as the role of economic depreciation rates and stocks of fixed capital have been well established in the literature. By exploring available evidence on the value of fixed assets in both developed and developing countries, this paper uses firm level data depreciations over the period 1990-2008 on total fixed assets, land and buildings, machinery and equipment in a group of selected OECD and developing countries along with the methodology of panel data estimations to investigate its role for the total factor productivity (TFP) growth as it is defined in the relevant growth accounting literature, since different capital depreciation profiles imply different rates of capital accumulation and, therefore, to different estimates of TFP growth. Preliminary empirical results indicate an inverse relationship between the two variables under investigation, although the intensity of the results is differentiated depending on the block of the country each firm belongs.