(2020). Depreciation of Business R&D Capital The Review of Income and Wealth, 66 (1), 161-180.
We develop a forward-looking profit model to estimate the depreciation rates of business R&D capital. By using U.S. government data 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.
