Structural Estimates of Depreciation from Wholesale Auctions of Used Ford Windstar Vans

Brian Sliker
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Brian Sliker: Bureau of Economic Analysis

BEA Working Papers from Bureau of Economic Analysis

Abstract: This paper estimates the depreciation of over twenty varieties of Ford Windstar passenger vans, using several hundred thousand observations from a deep collection of wholesale auction transactions. The data permit the estimation of individual vehicle ages apart from differences between resale- and model-years, so that age-, date-, and vintage- effects are all identifiable. Depreciation is modeled in two parts, estimated separately: obsolescence, wherein new model-years depress the resale values of older cohorts uniformly; and ordinary wear-and-tear, which reduces the resale values of individual vehicles in a nonuniform manner summarized by different individual-level service-lives. Obsolescence (and inflation) are estimated first, in a regression setting of third-order functions of age and miles to hold individual effects constant, allowing varietal and quarterly time dummies to trace each variety's counterfactual "as-if-new" price through time in a way that upholds the useful fiction of a Hicksian aggregate. The estimated as-if-new prices then anchor individual-level resale-price profiles, which are embedded in implicit service-life densities that vary over time and age. Quarterly moments of prices and miles are then matched by adjusting parameters for wear-and-tear.

JEL-codes: E60 (search for similar items in EconPapers)
Date: 2018-07
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Persistent link: https://EconPapers.repec.org/RePEc:bea:wpaper:0154

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