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Institutional Affiliation: University of Michigan
NBER Working Papers and Publications
|October 2007||Why Do Computers Depreciate? |
with Valerie A. Ramey, Matthew D. Shapiro
in Hard-to-Measure Goods and Services: Essays in Honor of Zvi Griliches, Ernst R. Berndt and Charles R. Hulten, editors
|October 2004||Why Do Computers Depreciate?|
with Valerie A. Ramey, Matthew D. Shapiro: w10831
The value of installed computers falls rapidly and therefore computers have a very high user cost. The paper provides a complete account of the non-financial user cost of personal computers -- decomposing it into replacement cost change, obsolescence, instantaneous depreciation, and age-related depreciation. The paper uses data on the resale price of computers and a hedonic price index for new computers to achieve this decomposition. Once obsolescence is taken into account, age-related depreciation -- which is often identified as deterioration -- is estimated to be negligible. While the majority of the loss in value of used computers comes from declines in replacement cost, this paper shows the second most important source of decline in value is obsolescence. Obsolescence is accelerated b...
Published: Berndt, Ernst and Charles Hulten (eds.) Hard to Measure Goods and Services: Essays in Honor of Zvi Griliches. Chicago: University of Chicago Press, 2007.