What is a capital consumption allowance?

Capital consumption is the part of the gross domestic product of the nation that can be attributed to depreciation. In fact, the consumption allowance is a means that allows the fact that it is necessary to replace the resources to maintain the level of productivity in the nation. In fact, the capital consumption contribution concerns two aspects of the country's capital.

One aspects of capital consumption is the status of the country's physical capital. Physical capital is sometimes referred to as normal capital and includes the value of a wide range of physical assets, such as soil, manufacturing plants, machines and other equipment used in the manufacturing process. Basically, physical capital is any source used in the production of goods and services, with the exception of people and human work.

The second factor that helps to create capital consumption is a person. Specifically, this aspect deals with the skills and knowledge that members of the workforce bring to the task of producing goods and services.Along with the consideration of the existing bank of knowledge and skills that are currently in active use, the calculation of capital will also allow the cost of providing education and training for the next generation of persons entering the workforce.

physical and human capital are subject to depreciation over time. Physical assets, such as buildings and machines, will be worn over time and need to be replaced. Human capital is also experiencing a turnover of graduation because workers leave the workforce and are replaced by newly trained workers who fill open slots and maintain the status quo productivity.

The purpose of capital consumption is not the measurement of productivity that increases the GIVEN country. Rather, the contribution is a means to measure how the Earth is doing in maintaining a certain level of productivity from one measured period to another.