The Measurement of Depreciation in the U.S. National Income and Product Accounts

As part of the recent comprehensive revision of the nipa’s, bea introduced an improved methodology for calculating depreciation. The improved methodology uses empirical evidence on the prices of used equipment and structures in resale markets, which has shown that depreciation for most types of assets approximates a geometric pattern. Previously, the depreciation estimates were derived using straight-line depreciation and assumed patterns of retirements. This article describes the theoretical and empirical literature that supports the new bea methodology. The author, a professor of economics at Northeastern University, Boston, Massachusetts, drafted the article while she was serving as a consultant to bea for this project. The views expressed are the author’s and do not necessarily represent those of bea.

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