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Estimation of the Depreciation Rate of Physical and R&D Capital in the U.S. Total Manufacturing Sector

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  • M. Ishaq Nadiri
  • Ingmar R. Prucha
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    Abstract

    Numerous studies on production and cost, the sources of productivity and studies on endogenous growth have recognized the pivotal role of the physical capital stock. Also there is a clear recognition by economists and policy makers that knowledge capital approximated by R&D capital is crucial for productivity growth and the transformation of the industrial structure of an economy. Critical to these contributions of physical and R&D capital is the measurement of the stocks of physical and R&D capital, which in turn requires measuring their depreciation rates. In this paper we have specified a model of factor demand that allows for estimating the depreciation rate of both physical and R&D capital jointly with the other model parameters. The model was estimated for the U.S. total manufacturing sector. Our estimate for the depreciation rate of physical capital is 0.059 and that for R&D capital is 0.12. Only gross investment data are needed to estimate the model parameters and the depreciation rates, and to generate consistent series for the stocks of physical and R&D capital.

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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4591.

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    Date of creation: Dec 1993
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    Publication status: published as NBER reprint 2104
    Handle: RePEc:nbr:nberwo:4591

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    1. Pakes, Ariel & Schankerman, Mark A., 1978. "The Rate of Obsolescence of Knowledge, Research Gestation Labs, and the Private Rate of Return to Research Resources," Working Papers, C.V. Starr Center for Applied Economics, New York University 78-13, C.V. Starr Center for Applied Economics, New York University.
    2. Jeffrey I. Bernstein & M. Ishaq Nadiri, 1988. "Interindustry R&D Spillovers, Rates Of Return, and Production In High-Tech Industries," NBER Working Papers, National Bureau of Economic Research, Inc 2554, National Bureau of Economic Research, Inc.
    3. Epstein, L. & Denny, M., 1980. "Endogenous capital utilization in a short-run production model : Theory and an empiral application," Journal of Econometrics, Elsevier, Elsevier, vol. 12(2), pages 189-207, February.
    4. Bernstein, Jeffrey I. & Nadiri, M. Ishaq, 1988. "Corporate Taxes And Incentives And The Structure Of Production: A Selected Survey," Working Papers, C.V. Starr Center for Applied Economics, New York University 88-11, C.V. Starr Center for Applied Economics, New York University.
    5. Jeffrey I. Bernstein & M. Ishaq Nadiri, 1991. "Product Demand, Cost of Production, Spillovers, and the Social Rate of Return to R&D," NBER Working Papers, National Bureau of Economic Research, Inc 3625, National Bureau of Economic Research, Inc.
    6. Zvi Griliches, 1980. "Returns to Research and Development Expenditures in the Private Sector," NBER Chapters, National Bureau of Economic Research, Inc, in: New Developments in Productivity Measurement, pages 419-462 National Bureau of Economic Research, Inc.
    7. Paul Romer, 1990. "Are Nonconvexities Important For Understanding Growth?," NBER Working Papers, National Bureau of Economic Research, Inc 3271, National Bureau of Economic Research, Inc.
    8. W. Erwin Diewert, 1980. "Aggregation Problems in the Measurement of Capital," NBER Chapters, National Bureau of Economic Research, Inc, in: The Measurement of Capital, pages 433-538 National Bureau of Economic Research, Inc.
    9. Mohnen, Pierre A. & Nadiri, M. Ishaq & Prucha, Ingmar R., 1986. "R&D, production structure and rates of return in the U.S., Japanese and German manufacturing sectors: A non-separable dynamic factor demand model," European Economic Review, Elsevier, Elsevier, vol. 30(4), pages 749-771, August.
    10. Morrison, C. J. & Berndt, E. R., 1981. "Short-run labor productivity in a dynamic model," Journal of Econometrics, Elsevier, Elsevier, vol. 16(3), pages 339-365, August.
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    Cited by:
    1. Dmitry Plotnikov, 2013. "Hysteresis in Unemployment and Jobless Recoveries," 2013 Meeting Papers, Society for Economic Dynamics 208, Society for Economic Dynamics.
    2. Jeffrey Bernstein & Pierre Mohnen, . "International R&D Spillovers Between U.S. and Japanese R&D Intensive Sectors," Carleton Industrial Organization Research Unit (CIORU), Carleton University, Department of Economics 94-04, Carleton University, Department of Economics.
    3. Keller, W., 1997. "Trade and the Transmission of Technology," Working papers, Wisconsin Madison - Social Systems 9620r, Wisconsin Madison - Social Systems.
    4. Aurora A. C. Teixeira, 2004. "How Has the Portuguese Innovation Capability Evolved? Estimating a Time Series of the Stock of Technological Knowledge, 1960-2001," FEP Working Papers, Universidade do Porto, Faculdade de Economia do Porto 153, Universidade do Porto, Faculdade de Economia do Porto.
    5. Mauro Bambi & Aurélien Saïdi, 2008. "Increasing Returns to Scale and Welfare: Ranking the Multiple Deterministic Equilibria," CER-ETH Economics working paper series, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich 08/99, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    6. Mattalia, Claudio, 2013. "Embodied technological change and technological revolution: Which sectors matter?," Journal of Macroeconomics, Elsevier, Elsevier, vol. 37(C), pages 249-264.
    7. Peters, Bettina & Lööf, Hans & Janz, Norbert, 2003. "Firm Level Innovation and Productivity: Is there a Common Story Across Countries?," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 03-26, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    8. Luca Bindelli, 2005. "Testing the New Keynesian Phillips curve: a frequency domain approach," Money Macro and Finance (MMF) Research Group Conference 2005, Money Macro and Finance Research Group 69, Money Macro and Finance Research Group.
    9. Marios Zachariadis, . "Productivity and Prices in Europe: Micro-Evidence for the Period 1975 to 1990," Departmental Working Papers, Department of Economics, Louisiana State University 2002-12, Department of Economics, Louisiana State University.
    10. Wolfgang Keller, 1997. "Trade and Transmission of Technology," NBER Working Papers, National Bureau of Economic Research, Inc 6113, National Bureau of Economic Research, Inc.
    11. Alston, Julian M. & Pardey, Philip G. & Ruttan, Vernon W., 2008. "Research Lags Revisited: Concepts and Evidence from U.S. Agriculture," Staff Papers, University of Minnesota, Department of Applied Economics 50091, University of Minnesota, Department of Applied Economics.
    12. Estelle P. Dauchy, 2013. "The Efficiency Cost of Asset Taxation in the U.S. after Accounting for Intangible Assets," Working Papers, Center for Economic and Financial Research (CEFIR) w0199, Center for Economic and Financial Research (CEFIR).
    13. Kenneth McKenzie, 2008. "Measuring tax incentives for R&D," International Tax and Public Finance, Springer, Springer, vol. 15(5), pages 563-581, October.

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