Economic vs. accounting depreciation

Moshe Kim, Giora Moore

Research output: Contribution to journalArticlepeer-review


In this paper we present and estimate a model of economic depreciation consistent with producer's optimization. The estimated economic depreciation, which is a function of the rate of utilization and level of maintenance, is about half of that used according to tax (accounting) depreciation. The difference between the economic and tax rates of depreciation results in a subsidy and earlier capital replacement. The implicit maximum net tax subsidy expressed as a proportion of the acquisition price of the asset is 13.3% for a sample of Canadian trucking firms.

Original languageEnglish
Pages (from-to)111-125
Number of pages15
JournalJournal of Accounting and Economics
Issue number2
StatePublished - Apr 1988

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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