An Update on Depreciation Rates for the Canadian Productivity Accounts

This paper generates updated estimates of depreciation rates to be used in the Canadian Productivity Accounts for the calculation of capital stock and the user cost of capital. Estimates are derived of depreciation profiles for a diverse set of assets, based on patterns of resale prices and retirement ages. A maximum likelihood technique is used to jointly estimate changes in the valuation of assets over the course of their service life, as well as the nature of the discard process used to dispose of assets to generate depreciation rates. This method is more efficient than others in producing estimates with less bias and higher efficiency. The earlier estimates that were derived for the period from 1985 to 2001 are compared with those for the latest period, from 2002 to 2010.