Depreciation Estimation, R&D Capital Stock, and North American Manufacturing Productivity Growth

This paper estimates R&D depreciation rates for the U.S. and Canadian manufacturing sectors. We find that R&D capital depreciates at a rate of 25 percent in the U.S., and in Canada the rate is 24 percent. Thus R&D capital depreciates at virtually the same rate in both countries. We also estimate similar user costs of R&D capital. This result implies that the marginal returns to R&D are equal in the two countries. Based on the new measures of R&D capital, factor price elasticities are estimated. For U.S. manufacturing a 1 percent increase in the R&D user cost leads to a 0.80 percent reduction in the demand for R&D capital, while for Canada the own R&D elasticity is significantly more inelastic at 0.14 percent. R&D growth contributes to TFP growth. In the U.S., R&D accounts for about 10 percent of annual productivity, while in Canada the contribution is around 6 percent. (This abstract was borrowed from another version of this item.)