Evidence that Capital Formation is Over-Estimated in ICP 2011

13 Pages Posted: 2 Aug 2015

See all articles by Theodore R. Breton

Theodore R. Breton

George Mason University - Department of Economics; Universidad EAFIT - School of Economics and Finance - Center for Research in Economic & Finance (CIEF)

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Date Written: July 19, 2015

Abstract

Using the ICP 2011’s cross-country data on input prices and project cost shares, I show that the construction prices in ICP 2011 are substantially underestimated in low and middle income countries. As a consequence, the PPP-adjusted construction in these countries is overestimated on average by about 100% and gross fixed capital formation as a share of GDP is overestimated by 25-30%. I also examine the ICP 2005 construction prices and show that there are similar problems with the ICP 2005 data.

Keywords: ICP 2011, ICP 2005, construction prices, PPP, construction data, capital data

JEL Classification: E30, O47

Suggested Citation

Breton, Theodore R., Evidence that Capital Formation is Over-Estimated in ICP 2011 (July 19, 2015). Center for Research in Economics and Finance (CIEF), Working Papers, No. 15-16, Available at SSRN: https://ssrn.com/abstract=2638670 or http://dx.doi.org/10.2139/ssrn.2638670

Theodore R. Breton (Contact Author)

George Mason University - Department of Economics ( email )

4400 University Drive
Fairfax, VA 22030
United States

Universidad EAFIT - School of Economics and Finance - Center for Research in Economic & Finance (CIEF) ( email )

Carrera 49 No. 7 South - 50
Medellin
Colombia

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