Depreciation of Business R&D Capital

By Wendy Li, Bronwyn H. Hall. The Review of Income and Wealth, 2018

173 citations recorded by the source corpus.

We develop a forward‐looking profit model to estimate the depreciation rates of business R&D capital. By using data from BEA and NSF 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 complete 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.

Subfields: Economics and Econometrics, Management of Technology and Innovation

View Paper: https://www.semanticscholar.org/paper/8a3115ef3d2ead04a01ddb996e6032ec66e9798e

Citations in the corpus

• Intangible Capital and the Investment-q Relation (2017, unknown): “(5)The BEA’s R&D depreciation rates are from the analysis of Li (2012). The depreciation rates range”
• Labor Share Decline and Intellectual Property Products Capital (2020, unknown): “In this context, the BEA estimates IPP depreciation using an economic model that maximizes profits over R&D choices with ad-hoc assumptions on the effect of R&D on profits (Li and Hall, 2017).”