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As a first year macroeconomics student I'm unable to understand if in rudimentary macroeconomic analysis that categorizes goods either as consumer or capital goods, with the latter being defined as "high-value , durable-use producer goods that undergo depreciation with employment in production process", the assets that a company posseses for use by its employees (like staff fridge) should be considered as a capital good or consumer good.

As in, should the comfort that these facilities extend to labour force be seen as an indirect contribution to the production process or not.

Any help would be greatly appreciated!

(Apologies if it's a basic question but I just couldn't find an answer elsewhere and exams are approaching.)

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The only difference between consumer and capital goods is whether or not the good in question is purchased by a firm or a consumer.

The practical implications of this is whether or not this expenditure is included in $I$ or $C$ of the GDP equation.

Investopedia defines $I$ as: "the sum of all the country's investment, including businesses capital expenditures"

Going into detail on "capital expenditure":

What is 'Capital Expenditure (CAPEX)'

Capital expenditure, or CapEx, are funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment. It is often used to undertake new projects or investments by the firm. This type of outlay is also made by companies to maintain or increase the scope of their operations. These expenditures can include everything from repairing a roof to building, to purchasing a piece of equipment, or building a brand new factory.

It would appear that a staff fridge is a capital expenditure based on the above criteria because it contributes to maintaining the firms scope of operations.

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I would argue that these types of goods should be considered capital because they are increasing employee productivity as a factor of production for knowledge workers.

In classical economics a capital good has these 3 characteristics:

  • It can be used in the production of other goods (this is what makes it a factor of production).
  • It is made by humans, in contrast to "land," which refers to naturally occurring resources such as geographical locations and minerals.
  • It is not used up immediately in the process of production, unlike raw materials or intermediate goods.

(https://simple.wikipedia.org/wiki/Capital_(economics))

An employee fridge clearly fits the second two requirements, as for the first requirement if having an employee fridge raises moral, and thus indirectly increases employee productivity, then I would consider it to be a capital good because it would seem to be a factor of production.

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  • $\begingroup$ If the fridge is a reward to staff then it is closer to payment in kind (possibly of a service). If it remains the company's property because it boosts productivity and will be automatically replaced in a few years time when it breaks then it is closer to a capital good $\endgroup$ – Henry Apr 7 '17 at 17:35
  • $\begingroup$ I would argue that it couldn't be considered a payment due to the fact that there is no ownership with the employees. A fridge definitely fits the definition of boosting productivity and being replaced as it depreciates which I think makes it a capital good $\endgroup$ – TheSaint321 Apr 10 '17 at 17:24

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