Alternative Capital Asset Depreciation Rates for U.S. Capital and Multifactor Productivity Measures

The Bureau of Economic Analysis (BEA) and the Bureau of Labor Statistics (BLS) use estimates of depreciation rates for structures and equipment to construct estimates of capital stock from data on capital investments. The depreciation rates are based mainly on research by Hulten and Wykoff from the early 1980s, and may be out of date. Recent studies by Statistics Canada (2007 and 2015), using Canadian data on used asset transactions from Canada’s Annual Capital Expenditures and Repair Survey (CAPEX) of establishments, found relatively faster depreciation rates, especially for structures. A study by Bokhari and Geltner (2019) used U.S. data on used asset prices and also found faster depreciation rates for structures. To illustrate the potential effects of implementing these estimates from newer studies, we created a concordance to match Canadian to U.S. asset categories, and then re-estimated BEA capital stock measures and the BLS capital and multifactor productivity measures using depreciation rates based on the CAPEX survey. We find that using these faster depreciation rates results in substantially lower estimates of net capital stocks and higher estimates of depreciation in BEA’s accounts, and has minimal effects on growth rates of multifactor productivity (MFP) in the BLS accounts.