Capital Services in U.S. Agriculture: Concepts, Comparisons, and the Treatment of Interest Rates

Measures of capital services are used in studies of production and to inform policies related to growth and development. A variety of methods have been used to measure capital stocks and service flows. We briefly review the methods commonly used to measure capital service flows, and the main assumptions. We then quantify the substantial differences between our newly constructed InSTePP series on capital use in U.S. agriculture and a comparable USDA series. We show that measures of capital services are sensitive to the treatment of interest rates, notably the use of fixed versus variable market rates, and we demonstrate the implications for measures of the quantity and productivity of agricultural capital in the United States. We conclude that when calculating capital usage in U.S. agriculture the use of a fixed rate of interest will generate more plausible estimates than the use of an annual market rate that varies from year to year.

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This is a substantially revised version of “Capital Service Flows: Concepts and Comparisons of Alternative Measures in U.S. Agriculture.” Andersen, Matt A.; Alston, Julian M.; Pardey, Philip G., St. Paul, MN: University of Minnesota, Department of Applied Economics; University of Minnesota, International Science and Technology Practice and Policy (InSTePP), 2009. (Staff paper P09-8; InSTePP paper 09-03)
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Staff Paper P10-6
InSTePP Paper 10-02

 Record created 2017-04-01, last modified 2018-01-22

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