Capital Stock Estimation of Chinese Industries Based on Endogenous Depreciation Rate

Capital stock is a very important variable in macroeconomic study and policy formulation. In the process of estimating capital stock, capital depreciation rates of core variables play a key role. The thesis mainly discusses the estimation of depreciation rate of fixed capital of 33 industries in China from 1981 to 2011, using production function method which is more scientific than fixed depreciation rate in that it can better reflect the industry situation. Perpetual inventory method is then used to estimate the capital stock of different industries each year on the basis of the resulting depreciation rates. Horizontally speaking, the results show that there are large differences in building capital stocks and equipment capital stocks of different industries, with more noticeable differences in building capital stocks. Longitudinally speaking, these two kinds of capital stock show an obvious growth trend. The result of estimation is consistent with the present domestic economic situation and characteristics of industries, so they, to some extent, can reflect the macroeconomic situation and characteristics of industry structure in China.