Estimation of R&D depreciation rates: a suggested methodology and preliminary application

Estimation of R&D depreciation rates: a suggested methodology and preliminary application

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Article ID: iaor201111966
Volume: 44
Issue: 2
Start Page Number: 387
End Page Number: 412
Publication Date: May 2011
Journal: Canadian Journal of Economics/Revue canadienne d'conomique
Authors: ,
Keywords: research
Abstract:

The 2008 version of the SNA has recommended capitalization of R&D expenditures. To implement this recommendation, we need to determine the depreciation rate of R&D capital. In this paper, we develop a simple model, based on a production function method that allows for monopolistic competition, to estimate the annual depreciation rate of R&D capital. We treat R&D capital as a technology shifter instead of as an explicit input factor. Both the R&D stock and the time variable are used to capture technological progress. Estimated R&D depreciation rates and markup factors are presented for the U.S. manufacturing sector and four U.S. knowledge‐intensive industries.

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