Physical Capital Stock: Sources, Methodology and Results

This paper describes the derivation of a new database of physical capital stock estimates for a selected group of 92 developing and industrial countries from 1960 to 1990 (of which 68 are from developing countries). This work is part of a larger research effort to analyze the sources of growth in developing countries and assess the effects of changes in the international economic environment on developing countries prospects. A special effort was made to compile investment series from 1950 onward for as many countries as possible and these were then aggregated according to a perpetual inventory method. In addition, various techniques were evaluated for the estimation of an initial capital stock and a modified Harberger approach was considered most suitable. The derived capital stock series prepared for this paper were compared to other capital stock series prepared by other researchers. The tests show the series correlated well with the results of most other similar exercises. The capital stock estimates were used to calculate median-capital output ratios and aggregate growth rates of the capital stock by country group; again, the results seem reasonable and consistent with our prior understanding of the relevant developing regions. Finally, the capital stock series were used to calculate total factor productivity growth rates using a constant returns to scale Cobb-Douglas production function with imposed factor shares. The results of this exercise were presented both on a regional basis as well as against per capita income in 1960 and were found to be consistent with the findings of other researchers.