Quarterly aggregate capital input and the cost of capital for the US: 1948–1993 1

Abstract

It is the flow of capital services, instead of the capital stock, along with the flows of other inputs, which is related to the flows of outputs in economic theory of cost and production. In applied research, quite often to capture the dynamic phenomena which occur within a year, there is a need to use quarterly data which may not be captured by annual data. However, quarterly data on capital input and the cost of capital are not readily available. Thus, in this paper the quarterly real and nominal aggregate net capital stock, flow of capital services (capital input), and the user cost of capital are constructed from 1948: I to 1993: IV. In the aggregation of net capital stock, we have combined four categories, i.e., nonresidential structures, nonresidential producers' durable equipment, residential structures and equipment, and business inventories. Following Jorgenson et al. [12], we then constructed aggregate capital input by using the Tornqvist aggregation index over these four categories. Finally, the composite cost of capital is obtained by dividing the revenue of capital by the aggregate capital input.