ESRI Discussion Paper Series No.319
Empirical Research on Depreciation of Business R&D Capital

Akiyuki Tonogi
Visiting Fellow, Economic and Social Research Institute, Cabinet Office, JAPAN and Lecturer, Institute of Economic Research, Hitotsubashi University.
Michiyo Kitaoka
Research Officer, Economic and Social Research Institute, Cabinet Office, JAPAN
Wendy C. Y. Li
Research Economist, Bureau of Economic Analysis, Department of Commerce, United States of America


The Japanese Government is planning to change the estimation methods of the Japanese System of National Accounts (JSNA) in 2016, from the 1993 System of National Accounts (SNA) to the 2008 SNA. Following this change, research and development (R&D) expenditures will be counted as investments and will be capitalized in the GDP accounts. To capitalize R&D expenditures, we need to estimate R&D capital stock; hence, the methods of estimating R&D depreciation rates are critical. This paper investigates the R&D depreciation in the JSNA based on the methodology developed by Li (2012a). By adopting Li’s model and using data on industry outputs and R&D investments from Japan, we estimate the R&D depreciation rates of 20 Japanese industries. The estimates we obtain are consistent with the results of prior studies and the recent survey results reported by Miyagawa et al. (2014).

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  2. page1
  3. page2
    1. Introduction
  4. page3
    2. The Model of Firm Implementing Forward-Looking R&D Investment
  5. page4
    3. Data
    1. page6
      Table 1: Industry-wise Classification of Sales and R&D Data
    2. page7
      Table 2: Summary of Industry-level Sales Data
    3. page7
      Table 3: Summary of Industry-level R&D Investment Data
    4. page8
      Table 4: Summary of R&D Intensity
  6. page8
    4. Empirical Analysis
    1. page9
      Figure 1: R&D Investment and Second-order Time Trend
    2. page11
      Table 5: Estimated Values of R&D Depreciation Rates (Perfect Foresight)
    3. page12
      Table 6: Estimated Values of R&D Depreciation Rates (Stochastic Simulation)
    4. page13
      Table 7: Comparison of Estimated R&D Depreciation Rate and Inverse of Surveyed Duration
  7. page13
    5. Conclusion
  8. page15
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