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How Fast Do Personal Computers Depreciate? Concepts and New Estimates

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Author Info
Mark E. Doms
Wendy E. Dunn
Stephen D. Oliner
Daniel E. Sichel

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Abstract

This paper provides new estimates of depreciation rates for personal computers using an extensive database of prices of used PCs. Our results show that PCs lose roughly half their remaining value, on average, with each additional year of use. We decompose that decline into age-related depreciation and a revaluation effect, where the latter effect is driven by the steep ongoing drop in the constant-quality prices of newly-introduced PCs. Our results are directly applicable for measuring the depreciation of PCs in the National Income and Product Accounts (NIPAs) and were incorporated into the December 2003 comprehensive NIPA revision. Regarding tax policy, our estimates suggest that the current tax depreciation schedule for PCs closely tracks the actual loss of value in a zero-inflation environment. However, because the tax code is not indexed for inflation, the tax allowances would be too small in present value for inflation rates above the very low level now prevailing.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10521.

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Date of creation: May 2004
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Handle: RePEc:nbr:nberwo:10521

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O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Ernst R. Berndt & Neal J. Rappaport, 2001. "Price and Quality of Desktop and Mobile Personal Computers: A Quarter-Century Historical Overview," American Economic Review, American Economic Association, vol. 91(2), pages 268-273, May. [Downloadable!] (restricted)
  2. Auerbach, Alan J., 1982. "Tax neutrality and the social discount rate : A suggested framework," Journal of Public Economics, Elsevier, vol. 17(3), pages 355-372, April. [Downloadable!] (restricted)
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  3. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Mirko Draca & Raffaella Sadun & John Van Reenen, 2006. "Productivity and ICT: A Review of the Evidence," CEP Discussion Papers dp0749, Centre for Economic Performance, LSE. [Downloadable!]
  2. Mark C. Doms, 2004. "The boom and bust in information technology investment," Economic Review, Federal Reserve Bank of San Francisco, pages 19-34. [Downloadable!]
  3. Michael J. Geske & Valerie A. Ramey & Matthew D. Shapiro, 2004. "Why Do Computers Depreciate?," NBER Working Papers 10831, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Nicholas Bloom & Raffaella Sadun & John Van Reenen, 2007. "Americans Do I.T. Better: US Multinationals and the Productivity Miracle," NBER Working Papers 13085, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Andreas Hornstein, 2004. "(Un)balanced growth," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 25-45. [Downloadable!]
  6. Jason G. Cummins, 2005. "A New Approach to the Valuation of Intangible Capital," NBER Chapters, in: Measuring Capital in the New Economy, pages 47-72 National Bureau of Economic Research, Inc. [Downloadable!]
    Other versions:
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