Working Paper: NBER ID: w23072
Authors: Gatan de Rassenfosse; Adam B. Jaffe
Abstract: This paper presents estimates of the R&D depreciation rate using survey data on Australian inventions. Its novelty is twofold. First, it relies on direct observation of the revenue streams of inventions. This is in sharp contrast with previous studies, which all rely on models based on indirect observation and require strong identifying assumptions. Second, it presents estimates of the effect of patent protection on the depreciation rate. Results suggest that the yearly depreciation rate varies in a range of 1 to 5 per cent, although the depreciation rate is stronger in the first two years of inventions averaging 8–9 per cent. Patent protection slows down the erosion of profits by about 1–2 percentage points.
Keywords: R&D; depreciation rate; patent protection; intangible assets
JEL Codes: M41; O32; O33; O34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Yearly depreciation rate of R&D assets (O32) | Depreciation rate varies from 1% to 5% (G31) |
| Yearly depreciation rate in the first two years (D25) | Depreciation rate averages 8-9% (E43) |
| Patent protection (O34) | Reduction in depreciation rate of inventions (O39) |
| Strong patents (O34) | Reduction in depreciation rate of inventions (O39) |
| Variation in depreciation rates across industries (D25) | Different depreciation rates (E43) |
| Pharmaceuticals and medicinal chemicals industry (L65) | Lowest rates of depreciation (G32) |
| Radio, television, and communication equipment industry (L63) | Highest rates of early depreciation (G32) |