Depreciation Rates for Australian Tractors and Headers - Is Machinery Depreciation a Fixed or Variable Cost?

Peter Tozer

No 137951, 2005 Conference (49th), February 9-11, 2005, Coff's Harbour, Australia from Australian Agricultural and Resource Economics Society

Abstract: Seven different remaining value functions for tractors and harvesters were estimated using data from advertised prices for used farm equipment. The generalised Box-Cox model was used to nest six of the seven functions. The more complex Box- Cox function explained the data better, but simpler models such as the sum-of-theyears- digits, or double-square root models were no different and were easier to manipulate to estimate depreciation rates and costs. There were up to three components of depreciation, drive-away, age and use related, depending on functional form. Drive-away depreciation is the immediate loss in value of a machine due to purchase, in some models this depreciation was higher than either age or use related depreciation. When drive-away depreciation was treated as a separate cost or when there was no drive-away depreciation, due to functional form, age and use depreciation costs were approximately equal.

Keywords: Demand and Price Analysis; Farm Management (search for similar items in EconPapers)
Pages: 14
Date: 2005
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Citations: View citations in EconPapers (3)

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Working Paper: Depreciation Rates for Australian Tractors and Headers - Is Machinery Depreciation a Fixed or Variable Cost? (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aare05:137951

DOI: 10.22004/ag.econ.137951

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