Bugs/planned vs executed investment#64
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jose-moran wants to merge 2 commits intobugs/productivity-growthfrom
Open
Bugs/planned vs executed investment#64jose-moran wants to merge 2 commits intobugs/productivity-growthfrom
jose-moran wants to merge 2 commits intobugs/productivity-growthfrom
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compute_tfp_growth() was using executed_productivity_investment (computed as total_capital_bought - replacement_cost) instead of planned_tfp_investment (the forward-looking decision from set_targets). These are fundamentally different calculations: - Planned: Based on available cash, hurdle rate, and budget constraints - Executed: Residual after depreciation is accounted for This caused TFP growth to be disconnected from firms' investment intentions: - Firms with high depreciation got less TFP growth than planned - Firms that over-bought capital got more TFP growth than planned (windfall) The fix changes compute_tfp_growth() to use this priority order: 1. planned_tfp_investment (TFP-specific portion of planned investment) 2. planned_productivity_investment (total planned, if TFP portion unavailable) 3. executed_productivity_investment (legacy fallback) 4. compute_productivity_investment() (final fallback for initial period) Fixes #59
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This fixes the issue #59 that @sternluke raised.
Details below:
compute_tfp_growth() was using executed_productivity_investment (computed as
total_capital_bought - replacement_cost) instead of planned_tfp_investment
(the forward-looking decision from set_targets).
These are fundamentally different calculations:
This caused TFP growth to be disconnected from firms' investment intentions:
The fix changes compute_tfp_growth() to use this priority order: