Keywords: Depreciation, computers, capital measurement
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.
Full paper (421 KB PDF)
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Last update: June 2, 2004