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Depreciation of Business R&D Capital

Author

Listed:
  • Wendy C.Y. Li
  • Bronwyn H. Hall

    (Bureau of Economic Analysis)

Abstract
We develop a forward‐looking profit model to estimate the depreciation rates of business R&D capital. By using U.S. government data between 1987 and 2007, and the newly developed model, we estimate both constant and time‐varying industry‐specific R&D depreciation rates. The results comprise a set of R&D depreciation rates for major U.S. high‐tech industries. They align with the main conclusions from recent studies that the rates are in general higher than the traditionally assumed 15 percent and vary across industries. The relative ranking of the constant R&D depreciation rates among industries is consistent with industry observations and the industry‐specific time‐varying rates are informative about the dynamics of technological change and the levels of competition across industries. Lastly, we also present a cross‐country comparison of the R&D depreciation rates between the U.S. and Japan, and find that the results reflect the relative technological competitiveness in key industries.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Wendy C.Y. Li & Bronwyn H. Hall, 2016. "Depreciation of Business R&D Capital," BEA Working Papers 0135, Bureau of Economic Analysis.
    • Handle: RePEc:bea:wpaper:0135
    as

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    References listed on IDEAS

    as
    1. Bronwyn H. Hall & Adam B. Jaffe & Manuel Trajtenberg, 2000. "Market Value and Patent Citations: A First Look," NBER Working Papers 7741, National Bureau of Economic Research, Inc.
    2. Bronwyn Hall & Christian Helmers & Mark Rogers & Vania Sena, 2014. "The Choice between Formal and Informal Intellectual Property: A Review," Journal of Economic Literature, American Economic Association, vol. 52(2), pages 375-423, June.
    3. Zvi Griliches, 1998. "Productivity and R&D at the Firm Level," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 100-133, National Bureau of Economic Research, Inc.
    4. Dale W. Jorgenson, 2001. "Information Technology and the U.S. Economy," Higher School of Economics Economic Journal Экономический журнал Высшей школы экономики, CyberLeninka;Федеральное государственное автономное образовательное учреждение высшего образования «Национальный исследовательский университет «Высшая школа экономики», vol. 5(1), pages 3-34.
    5. Ana Aizcorbe & Samuel Kortum, 2005. "Moore's Law and the Semiconductor Industry: A Vintage Model," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(4), pages 603-630, December.
    6. Bronwyn H. Hall, 2010. "Measuring the Returns to R&D: The Depreciation Problem," NBER Chapters, in: Contributions in Memory of Zvi Griliches, pages 341-381, National Bureau of Economic Research, Inc.
    7. Bernstein, Jeffrey I. & Mamuneas, Theofanis P., 2006. "R&D depreciation, stocks, user costs and productivity growth for US R&D intensive industries," Structural Change and Economic Dynamics, Elsevier, vol. 17(1), pages 70-98, January.
    8. D. W. Jorgenson & Z. Griliches, 1967. "The Explanation of Productivity Change," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 34(3), pages 249-283.
    9. Carol Corrado & Charles Hulten & Daniel Sichel, 2009. "Intangible Capital And U.S. Economic Growth," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(3), pages 661-685, September.
    10. Zvi Griliches, 1984. "R&D, Patents, and Productivity," NBER Books, National Bureau of Economic Research, Inc, number gril84-1.
    11. Hall, Bronwyn H. & Hayashi, Fumio, 1989. "Research and Development as an Investment," Department of Economics, Working Paper Series qt8br8d266, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    12. repec:adr:anecst:y:2005:i:79-80:p:14 is not listed on IDEAS
    13. Richard C. Levin & Alvin K. Klevorick & Richard R. Nelson & Sidney G. Winter, 1987. "Appropriating the Returns from Industrial Research and Development," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(3, Specia), pages 783-832.
    14. Charles Ian Mead, 2007. "R&D Depreciation Rates in the 2007 R&D Satellite Account," BEA Papers 0084, Bureau of Economic Analysis.
    15. Ariel Pakes & Mark Schankerman, 1984. "The Rate of Obsolescence of Patents, Research Gestation Lags, and the Private Rate of Return to Research Resources," NBER Chapters, in: R&D, Patents, and Productivity, pages 73-88, National Bureau of Economic Research, Inc.
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    Full references (including those not matched with items on IDEAS)

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    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General

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