Empirical Economics

Simon Moon

So, anyone who took an intro course in micro or macro probably ran into some sort of equation somewhere talking about output being a function of capital and labor, say Y = F(K,L). In the macro sense, this is usually taken to mean Y = total output of an economy, K = total capital in the economy, L = the size of the total labor force.

Empirically, there are pretty obvious ways to estimate Y and L; typically, we estimate Y by measuring real GDP (at least when talking about a national economy), and L by measuring the work force, or even just by approximating by saying it's some percentage of total population. K is a different story.

My question is: when viewing a national economy, what would be the best way to estimate capital stock? If you look at the BEA's account of real GDP, there's a subheading of "Gross private domestic investment." Would that be it? What does that actually measure?

blah

Gross private domestic investment is basically just a fancy way of saying investment when calculating GDP.

Capital stock is the accumulation of physical capital in an economy, so yeah, investment.

*Obligatory sentence about GDP being a horrible indicator*

Simon Moon

Well, except investment is a flow, and I'm looking for a measure of the (net?) stock.

I think I found it. The BEA reports Fixed Assets on a different set of tables than their NIPA tables.