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: | Huang Ning, Diewert Erwin |
Keywords: | research |
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.