Obsolescence, input augmentation, and growth accounting

The paper points to a serious conceptual inconsistency in conventional measures of capital used in most empirical work on economic growth. When appropriate corrections are made, it is found that plausible alternative values for the relative magnitude of obsolescence and physical decay imply very different rates of growth in capital. This, in turn, leads to large differences in the fraction of growth in output attributed to input augmenting technical change as compared with the 'Solow residual'. (C) 1998 Elsevier Science B.V. All rights reserved.