Capital productivity

The capital productivity is the economic measure , a measure of productivity . It indicates the relationship between the production volume ( flow rate ) on the one hand and the capital stock required for this ( stock size ) on the other. Instead of the capital stock, the wear and tear of the capital stock of the underlying period (flow variable) could also be used.

The Federal Statistical Office in its publications on national accounts shows capital productivity by comparing the gross domestic product (GDP) at constant prices (most recently in 1995) to the capital stock. The latter is the gross fixed assets also calculated in constant prices.

Capital coefficient

The reciprocal of capital productivity is called the capital coefficient .

Capital productivity presented as a formula:

{\ displaystyle {\ text {Capital productivity}} = {\ frac {\ text {Domestic product}} {\ text {Capital stock}}} = {\ frac {Y} {K}}}

Capital coefficient represented as a formula:

{\ displaystyle {\ text {capital coefficient}} = {\ frac {\ text {capital stock}} {\ text {domestic product}}} = {\ frac {K} {Y}}}

Incremental capital coefficient

In order to empirically determine capital productivity or its reciprocal value, the capital coefficient, the capital stock must be known. Since it is not so easy to measure it, the incremental capital coefficient is sometimes used . The "incremental capital-output ratio" (ICOR) is defined as:

{\ displaystyle {\ text {incremental capital coefficient}} = {\ frac {\ Delta K} {\ Delta Y}}}

The change in gross domestic product from year t to year t + n can be used for and for the corresponding change in the capital stock, represented by the gross fixed capital formation in years t to t + n . (Strictly speaking, one would have to use the net investment and the net domestic product. However, since this would hardly change the results, the gross domestic product and gross fixed capital formation are simply taken.) ${\ displaystyle \ Delta Y}$ ${\ displaystyle \ Delta K}$

Incremental capital coefficient, 1960 to 2004, USA, FRG and Japan

An increasing incremental capital coefficient indicates that an ever increasing increase in the capital stock is necessary in order to achieve a certain increase in GDP. The graph shows the development of the incremental capital coefficient, calculated over a period of 4 years from (1960–1964) to (2000–2004). The development is shown for the countries of the triad , i.e. the three largest economies in the world, which together account for almost half of world GDP.

Explanations

Capital productivity, defined as the (gross) domestic product in relation to the capital stock (capital employed), represents a kind of upper limit for macroeconomic profitability ( profit rate ). The profit income in relation to the capital stock can be understood as macroeconomic profitability (profit rate). If capital productivity declines, this profitability can only be maintained if at the same time the share of wages in domestic product ( wage share ) is pushed back. Stable capital productivity is therefore desirable, since otherwise distribution conflicts will arise. It should also be taken into account that the capital employed does not only consist of the value of the capital stock, but also advance payments , cash management, etc. must be taken into account. In addition, tax rebates for companies can also stabilize after-tax profitability. All of these measures will expire at some point if the trend of falling capital productivity continues.

Web links

Data source: Ameco Ameco database of the services of the EU Commission