Affiliations: [a] Department of Economics, Emory University, Atlanta,
GA 30322-2240, USA. Ph: +1 (404) 727-2941, Fax: +1 (404) 727-4639,
[email protected]
Correspondence:
[*]
I am grateful to John Musgrave of the Bureau of Economic Analysis and Stephen
Oliner of the Board of Governors for kindly answering my questions and for
providing some of the data used in this study. Martin J. Bailey, Bob
Carpenter, John Musgrave, and Keith Shriver have read an earlier version of
this manuscript and provided useful comments. I also thank Samiran Banerjee,
Hashem Dezhbakhsh, and Varda Yaari for helpful discussions. Haiwei Chen and
Yihong Xia provided research assistance. The usual disclaimer applies.
Address all correspondence to: Daniel Levy, Department of Economics, Emory
University, Atlanta, GA 30322, USA.
Abstract: I estimate time varying aggregate capital stock depreciation rates for the
post-war U.S. economy using capital-investment evolution equation along with the
data on the annual net capital stock and corresponding quarterly gross
investment series. I estimate depreciation rates of consumer durable goods,
producer durable goods, and nonresidential business structures. The estimation
results suggest that the three depreciation rate series have been behaving very
differently over time. In particular, I find that over time the implied
depreciation rate of nonresidential business structures has remained stable, the
implied depreciation rate of consumer durable goods has been steadily declining,
while the implied depreciation rate of producer durable goods has been
increasing, especially during the last 10–15 years. These findings are
interpreted in terms of the changes in the composition of the aggregate
nonresidential business fixed and producer durable good capital stocks. In
addition, I discuss the implications of the changes introduced during the 1980s
in rules and regulations governing a depreciation accounting for tax purposes,
and their effect on the estimates of capital depreciation rates derived in this
paper. The main argument the paper makes is that technological progress may be
leading to accelerated depreciation of producer durable goods and equipment
since newer and more advanced technology makes older equipment obsolete. The
empirical evidence reported in this paper supports this argument.
