Capital Stock Turnover in Industry: Is There a Near-Term Opportunity to Improve Efficiency?

摘要

Investment and capital stock decision-making is reasonably well understood, but quantitative evidence of how industries behave is in short supply. This study examines investment and capital stock data for major energy-intensive industries, and has two objectives. The first objective of this study is to understand the age profile of equipment because this profile determines how rapidly capital becomes obsolete (either as a result of reaching its effective lifetime or because of economic factors). A second objective is to indicate the rules (tax lives, depreciation schedules, etc.) that affect decision-making processes that might be easily changed to alter decision making. We know that the basic industries ― forest products, chemicals, nonmetallic minerals, primary metals, mining and agriculture ― are both capital-and energy-intensive. How rapidly energy intensity changes depends, in large measure, on how rapidly new capital substitutes for old. This process occurs continuously. Recent data on capital assets are used to characterize capital in energy-intensive industries and to develop age profiles for capital purchases in 1992. The decision making about the purchase of capital good is then examined, both from a capital budgeting perspective and from an economic perspective. One important factor in this choice is the tax treatment of capital, which has been modified frequently since the 1950s. Accordingly, changes in tax rules are examined to see what, if any, impact these changes have had on investment in energy intensive industries. The age profile of capital stocks are then examined to demonstrate how these age profiles can affect energy consumption in industry.