Estimation of R&D Depreciation Rates: A Suggested Methodology and Preliminary Application

Walter Diewert and Ning Huang

Economics working papers from Vancouver School of Economics

Abstract: The 2008 version of the SNA will recommend capitalization of R&D expenditures. To implement this recommendation, measures for the stock of R&D capital must be constructed, and this implies a need to determine the depreciation rate of R&D capital. In this paper, we develop a simple model, based on a production function method that allows for monopolistic competition, to estimate the annual depreciation rate of R&D capital. We treat R&D capital as a technology shifter instead of as an explicit input factor. Both the R&D stock and the time variable are used to capture technological progress. Modeling R&D capital in this manner can better represent the role R&D plays in economic growth. Estimated R&D depreciation rates and markup factors are presented for the U.S. manufacturing sector and four U.S. knowledge intensive industries, namely chemical products (SIC 28), non-electrical machinery (SIC 35), electrical products (SIC 36) and transportation equipment (SIC 37).

Keywords: Research and development; R&D depreciation rates; R&D capital stocks; production theory; obsolescence; flexible functional forms; technology shifts; m (search for similar items in EconPapers)
Pages: 24 pages
Date: 2009-10-29, Revised 2009-10-29
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Estimation of R&D depreciation rates: a suggested methodology and preliminary application (2011)
Journal Article: Estimation of R&D depreciation rates: a suggested methodology and preliminary application (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ubc:bricol:erwin_diewert-2009-57

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