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Depreciation Rates for the Productivity Accounts

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  • Statistics Canada

Abstract

This paper generates depreciation profiles for a diverse set of assets based on patterns of resale prices and retirements. In doing so, it explores the sensitivity of estimates of the growth in capital stock and capital services to alternate estimates of depreciation. In the first instance, survival analysis techniques are used to estimate changes in valuation of assets over the course of their service life. In the second instance, a two-step procedure is utilized that first estimates the discard function for used assets (assets discarded at zero prices) and then uses the resulting estimates to correct for selection bias that arises when just positive used-asset prices are employed to estimate age-price profiles to produce depreciation rates. For the third method, a discard function and an asset efficiency function are jointly specified and estimated. These three different methods produce depreciation profiles that follow convex patterns. Accelerated profiles are apparent for many individual assets in the machinery and equipment and structures classes. We also compare the ex post estimates of length of life that are based on outcomes to ex ante expected lives and find they are much the same. We therefore choose ex ante lives along with information from the ex post rates on the rate of decline in an asset's value to generate a set of depreciation rates for use in the productivity accounts. We then use our depreciation model to produce estimates of the growth in capital stock and capital services over the 1961 to 1996 period. We find that the resulting estimates of capital stock and capital services are quite similar to those previously produced.

Suggested Citation

  • Statistics Canada, 2007. "Depreciation Rates for the Productivity Accounts," The Canadian Productivity Review 2007005e, Statistics Canada, Economic Analysis Division.
    • Handle: RePEc:stc:stcp6e:2007005e
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    File URL: http://www.statcan.gc.ca/bsolc/olc-cel/olc-cel?catno=15-206-X2007005&lang=eng
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    Cited by:

    1. Vander Donckt, Marie & Chan, Philip & Silvestrini, Andrea, 2021. "A new global database on agriculture investment and capital stock," Food Policy, Elsevier, vol. 100(C).
    2. Aqib Aslam & Enrico Berkes & Martin Fukac & Jeta Menkulasi & Axel Schimmelpfennig, 2014. "Afghanistan: Balancing Social and Security Spending in the Context of a Shrinking Resource Envelope," Asian Development Review, MIT Press, vol. 31(2), pages 165-197, September.
    3. Ana Rincon-Aznar & Rebecca Riley & Garry Young, 2017. "Academic Review of Asset Lives in the UK," National Institute of Economic and Social Research (NIESR) Discussion Papers 474, National Institute of Economic and Social Research.
    4. Derek Blades, 2015. "A Short-Cut Method of Estimating Capital Stocks: When Can It be Used and How Well Does It Work?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 61(2), pages 373-393, June.
    5. José Dorich & Michael K. Johnston & Rhys R. Mendes & Stephen Murchison & Yang Zhang, 2013. "ToTEM II: An Updated Version of the Bank of Canada’s Quarterly Projection Model," Technical Reports 100, Bank of Canada.
    6. Barth, Nini & Cappelen, Ådne & Skjerpen, Terje & Todsen, Steinar & Åbyholm, Thom, 2016. "Expected service lives and depreciation profiles for capital assets: Evidence based on a survey of Norwegian firms," Journal of Economic and Social Measurement, IOS Press, issue 4, pages 329-369.
    7. Macdonald, Ryan, 2008. "An Examination of Public Capital's Role in Production," Economic Analysis (EA) Research Paper Series 2008050e, Statistics Canada, Analytical Studies Branch.
    8. Wulong Gu, 2012. "Estimating Capital Input for Measuring Business Sector Multifactor Productivity Growth in Canada: Response to Diewert and Yu," International Productivity Monitor, Centre for the Study of Living Standards, vol. 24, pages 49-62, Fall.
    9. Zand, Fardad & Van Beers, Cees & Van Leeuwen, George, 2011. "Information technology, organizational change and firm productivity: A panel study of complementarity effects and clustering patterns in Manufacturing and Services," MPRA Paper 46469, University Library of Munich, Germany.
    10. Elise Dupont & Marc Germain & Hervé Jeanmart, 2021. "Estimate of the Societal Energy Return on Investment (EROI)," Biophysical Economics and Resource Quality, Springer, vol. 6(1), pages 1-14, March.

    More about this item

    Keywords

    Economic accounts; Productivity accounts;

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