How Fast Do Personal Computers Depreciate? Concepts and New Estimates

Posted: 14 Jan 2005

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

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.

Keywords: Depreciation, computers, capital measurement

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 . Available at SSRN: https://ssrn.com/abstract=594382

Mark E. Doms

Federal Reserve Bank of San Francisco ( email )

101 Market Street
San Francisco, CA 94105
United States

Wendy E. Dunn

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Stephen D. Oliner

American Enterprise Institute ( email )

1150 17th Street, N.W.
Washington, DC 20036
United States
2024195205 (Phone)

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

Daniel E. Sichel (Contact Author)

Wellesley College ( email )

106 Central St.
Wellesley, MA 02181
United States

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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