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Estimation of a variable rate of depreciation: a dummy variable approach

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  • Prucha, Ingmar

Abstract

Many important economic problems require measures of physical and R&D capital. Except for some recent studies, there have been relatively few contributions in the literature that provide econometric estimates for the depreciation rates of physical and R&D capital. One reason for the relative paucity of such econometric studies may be that if the depreciation rates are viewed as unknown parameters, or as a functions of unknown parameters, then the corresponding stocks of physical and R&D capital are also unobserved, resulting in a formidable estimation problem. In the past econometric estimates of the depreciation rates of physical and R&D capital were typically obtained from self-programmed estimation algorithms. In this note we introduce an approach that permits the econometric estimation of constant and variable rates of depreciation of physical and R&D capital using standard econometric packages.
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  • Prucha, Ingmar, 1997. "Estimation of a variable rate of depreciation: a dummy variable approach," Structural Change and Economic Dynamics, Elsevier, vol. 8(3), pages 319-325, August.
    • Handle: RePEc:eee:streco:v:8:y:1997:i:3:p:319-325
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    1. Kokkelenberg, Edward C., 1984. "The specification and estimation of interrelated factor demands under uncertainty," Journal of Economic Dynamics and Control, Elsevier, vol. 7(3), pages 181-207, September.
    2. Nadiri, M Ishaq & Prucha, Ingmar R, 1996. "Estimation of the Depreciation Rate of Physical and R&D Capital in the U.S. Total Manufacturing Sector," Economic Inquiry, Western Economic Association International, vol. 34(1), pages 43-56, January.
    3. Epstein, L. & Denny, M., 1980. "Endogenous capital utilization in a short-run production model : Theory and an empiral application," Journal of Econometrics, Elsevier, vol. 12(2), pages 189-207, February.
    4. Prucha, Ingmar R, 1995. "On the Econometric Estimation of a Constant Rate of Depreciation," Empirical Economics, Springer, vol. 20(2), pages 299-302.
    5. Prucha, Ingmar R. & Nadiri, M. Ishaq, 1996. "Endogenous capital utilization and productivity measurement in dynamic factor demand models Theory and an application to the U.S. electrical machinery industry," Journal of Econometrics, Elsevier, vol. 71(1-2), pages 343-379.
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    1. M. Ishaq Nadiri & Ingmar Prucha, 2001. "Dynamic Factor Demand Models and Productivity Analysis," NBER Chapters, in: New Developments in Productivity Analysis, pages 103-172, National Bureau of Economic Research, Inc.

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