How much of a change in spending has reached the asset
The same figures apply to building and to losing. A rate slow enough to make an asset durable is slow enough to make it indefensible in an annual review.
| Depreciation rate | After 1 year | After 3 years | After 5 years | After 10 years |
|---|---|---|---|---|
| 2.5% a year | 3% | 7% | 12% | 22% |
| 20% a year | 20% | 49% | 67% | 89% |
| 55% a year | 55% | 91% | 98% | 100% |
Swipe or scroll horizontally if the table is wider than your screen.
Reference & Evidence
Source: Author’s calculation from the capital accumulation identity: the share of a permanent change in the maintaining flow that has arrived in the stock after t years is 1 − (1 − d) raised to the power t, where d is the annual rate. Rates as in Table 1.
Each line is a claim from the register this journal publishes against, resolved from the register at build time.
- A The 2.5% rate measures decay of one year's consumption experiences in brand preference, not advertising capital Bronnenberg, Dube & Gentzkow (2012), p. 2474 ·
BDG12-C1 - A The organisational-capital depreciation rate is assumed rather than estimated, which is why the paper's own contrast is with the estimated R&D rate: "The results of our parameter estimation imply an average 33% annual depreciation rate for R&D versus 23% for BEA R&D depreciation rates where industry coverage is available" Ewens, Peters & Wang (2019, revised 2023), note to Table 1 ·
EPW24-C1 - A They adopt a 55% annual advertising-capital depreciation rate from Corrado et al. (2016) Bronnenberg, Dube & Syverson (2022), section II ·
BDS22-C2
Grades: A, verified against the printed page of the primary source · B, primary source, text layer only · C, authoritative secondary · D, reported.
Related exhibits
-
The same asset, left alone, at three published rates
From the essay Every growth budget is a gross number
-
Every published depreciation rate, and what it was measured on
From the essay Every growth budget is a gross number
-
What the stop test reports when there is nothing to report
From the essay Every growth budget is a gross number