Modeling the material stock of manufactured capital with production function

Abstract

Material stocks play a key role in the increasing and unsustainable utilization of natural resources. However, comprehensive and disaggregated datasets are still scarce in the literature of socio-economic metabolism research. The model presented in this article is able to estimate the capital stocks of agriculture, industry and services both in physical and in monetary dimensions.The estimation method based on Cobb-Douglas production function was introduced in this article through two example sectors of Hungarian economy, namely the agricultural production and transportation. Three capital stock estimations of four are statistically significant. The highest impact on output of transportation sector has the investment into machinery and ICT, it is proved with high input elasticity (0.656) relative to other factors. In case of agriculture, drought and machinery has significant influence on the production (-0.958 and 0.5633). Transportation sector requires 12,654 Mt of building stock and 2064 Mt of machinery and ICT, while agriculture utilizes 347,112 Mt building stock and 1891 Mt machinery and ICT.In this article, a condition determining the weight of annual output relative to the specific type of capital stock is discussed as well. Furthermore, the significance of the internalization of externalities during the life cycle of the built capital stock is analyzed, with a correspondence to standard microeconomic theory. Although marginal product of machinery and ICT exceeds significantly those of buildings and infrastructures in the studied sectors, material stock of buildings and infrastructure are higher, hence they are available at lower per unit cost.