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Price Changes, Maintenance, And The Rate Of Depreciation

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  • Randy A. Nelson
  • Michael R. Caputo

Abstract

This study estimates rates of deterioration and depreciation for a sample of used privately owned single- and twin-engine aircraft over the period 1971-1991. The adoption of a strict liability standard in the 1970s lead to a 775% increase in liability expenses for the manufacturers of private planes between 1977 and 1985, resulting in sharp increases in the prices of new and used planes throughout the late 1970s and 1980s. This period of rapid price inflation coincides with a decrease in the depreciation rates for used single- and twin-engine aircraft after 1975. In addition, our results indicate that the rate of deterioration is positively related to the required cost of engine maintenance. These findings call into question the commonly invoked assumption that depreciation rates may be treated as exogenously determined constants, and lend support to the hypothesis that deterioration and depreciation rates respond systematically to key economic variables. © 1997 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

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  • Randy A. Nelson & Michael R. Caputo, 2000. "Price Changes, Maintenance, And The Rate Of Depreciation," The Review of Economics and Statistics, MIT Press, vol. 79(3), pages 422-430, August.
    • Handle: RePEc:tpr:restat:v:79:y:2000:i:3:p:422-430
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    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/003465300556832
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    Cited by:

    1. Albonico, Alice & Kalyvitis, Sarantis & Pappa, Evi, 2014. "Capital maintenance and depreciation over the business cycle," Journal of Economic Dynamics and Control, Elsevier, vol. 39(C), pages 273-286.
    2. Julián David Parada, 2008. "Tasa de depreciación endógena y crecimiento económico," Documentos de Trabajo 4594, Universidad del Rosario.
    3. Sanders, John H. & Ahmed, Mohamed A. M., 1998. "Discussant'S Comments For American Agricultural Economics Association Annual Meeting, Selected Papers Session Sp-10s, "Farm-Level Analyses In Developing Countries"," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20894, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. Mary J. Keeney, 2007. "Measuring Irish Capital," The Economic and Social Review, Economic and Social Studies, vol. 38(1), pages 25-62.
    5. Martial Dupaigne, 2007. "Les variations choisies de l'utilisation du capital : une revue des implications macroéconomiques," Revue d'économie politique, Dalloz, vol. 117(2), pages 161-196.
    6. Dimitrios Koumparoulis, 2011. "The Proportionality Hypothesis in Capital Theory: an Assessment of the Literature," EuroEconomica, Danubius University of Galati, issue 27, pages 27-39, February.
    7. Ekboir, Javier M. & Jarvis, Lovell S. & Rey, Carlos, 1998. "Investment Effects Of Endogenous And Exogenous Depreciation: Improved Pastures In Uruguay," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20934, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    8. S. Devrim Yilmaz, 2008. "Public and Private Maintenance Expenditure in a Growing Economy," Centre for Growth and Business Cycle Research Discussion Paper Series 108, Economics, The University of Manchester.
    9. Alice Albonico & Sarantis Kalyvitis & Evi Pappa, 2011. "Real Business Cycles with Capital Maintenance," Quaderni di Dipartimento 147, University of Pavia, Department of Economics and Quantitative Methods.

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