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Depreciation of Business R&D Capital

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  • Wendy C.Y. Li
  • Bronwyn H. Hall

Abstract

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 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.

Suggested Citation

  • Wendy C.Y. Li & Bronwyn H. Hall, 2016. "Depreciation of Business R&D Capital," NBER Working Papers 22473, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:22473
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    1. Carol Corrado & Charles Hulten & Daniel Sichel, 2009. "Intangible Capital And U.S. Economic Growth," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(3), pages 661-685, September.
    2. Bronwyn H. Hall, 2010. "Measuring the Returns to R&D: The Depreciation Problem," NBER Chapters, in: Contributions in Memory of Zvi Griliches, pages 341-381, National Bureau of Economic Research, Inc.
    3. Charles Ian Mead, 2007. "R&D Depreciation Rates in the 2007 R&D Satellite Account," BEA Papers 0084, Bureau of Economic Analysis.
    4. Bronwyn Hall & Christian Helmers & Mark Rogers & Vania Sena, 2014. "The Choice between Formal and Informal Intellectual Property: A Review," Journal of Economic Literature, American Economic Association, vol. 52(2), pages 375-423, June.
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    More about this item

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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