Estimating the stock of infrastructure

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The estimate of the stock of an infrastructure asset starts by identifying the investment flows through time, which was completed in the first stage. Once the investment flows are estimated, the stock of those detailed assets and their respective depreciation can be measured. The stock of infrastructure is estimated using the perpetual inventory method (PIM) which accumulates investment through time. The essence of the method is to add each year’s gross investment (gross fixed capital formation) to the capital stock of the previous year and to subtract the consumption of fixed capital. Since the stock needs to be valued at current prices, the model requires price information to inflate the previous years’ stock to current period values. In addition, since the stock gradually deteriorates as it is used, information on the services lives of the assets and their depreciation profile is required. The combination of gross investment flows, price indexes, service lives, and methods of depreciation all figure into the calculation of Canada’s capital stock.