How Fast Do Personal Computers Depreciate? Concepts and New Estimates

60 Pages Posted: 9 Jun 2004 Last revised: 7 Oct 2021

See all articles by Mark E. Doms

Mark E. Doms

Federal Reserve Bank of San Francisco

Wendy E. Dunn

Board of Governors of the Federal Reserve System

Stephen D. Oliner

American Enterprise Institute

Daniel E. Sichel

Wellesley College; NBER

Multiple version iconThere are 2 versions of this paper

Date Written: May 2004

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.

Suggested Citation

Doms, Mark E. and Dunn, Wendy E. and Oliner, Stephen D. and Sichel, Daniel E., How Fast Do Personal Computers Depreciate? Concepts and New Estimates (May 2004). NBER Working Paper No. w10521, Available at SSRN: https://ssrn.com/abstract=552884

Mark E. Doms (Contact Author)

Federal Reserve Bank of San Francisco ( email )

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Wendy E. Dunn

Board of Governors of the Federal Reserve System ( email )

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Stephen D. Oliner

American Enterprise Institute ( email )

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HOME PAGE: http://www.aei.org/scholar/stephen-d-oliner/

Daniel E. Sichel

Wellesley College ( email )

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Wellesley, MA 02181
United States

NBER ( email )

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Cambridge, MA 02138
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