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Implications of Geometric Cohort Depreciation for Service-Life Distributions

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  • Brian Sliker

    (Bureau of Economic Analysis)

Abstract

This paper decomposes cohort-level Geometric depreciation into a weighted average of individual non-Geometric forms. The individual forms are general enough to represent actual individual depreciation patterns adequately, and the weights on individuals resemble Gamma service-life densities under most circumstances. Researchers with a knowledge of used assets' retirement patterns, but not prices, could use the Gamma parameters to estimate the features of (stipulated) Geometric cohort depreciation. One of the individual forms, weighted appropriately, could smoothly replace Geometric depreciation when the rate of return is negative. The analysis also offers support for faster depreciation rates for structures assets in the National Income and Product Accounts.

Suggested Citation

  • Brian Sliker, 2018. "Implications of Geometric Cohort Depreciation for Service-Life Distributions," BEA Working Papers 0155, Bureau of Economic Analysis.
    • Handle: RePEc:bea:wpaper:0155
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    File URL: https://www.bea.gov/system/files/papers/Revised%20Geo%20Depr%20Gamma%20Lifespans.pdf
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    References listed on IDEAS

    as
    1. Kevin J. Fox & Erwin Diewert & Hui Wei, 2017. "Getting Rental Prices Right for Computers: Reconciling Different Perspectives on Depreciation," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 63, pages 149-168, February.
    2. Adam Copeland & Wendy Dunn & George Hall, 2011. "Inventories and the automobile market," RAND Journal of Economics, RAND Corporation, vol. 42(1), pages 121-149, March.
    3. Diewert, W. Erwin & Wykoff, Frank C., 2006. "Depreciation, Deterioration and Obsolescence when there is Embodied or Disembodied Technical Change," Economics working papers diewert-06-11-23-08-38-56, Vancouver School of Economics, revised 13 Jul 2007.
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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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