Estimating farm equipment depreciation: which functional form is best?
For some crops, machinery operating and ownership costs can represent more than half of crop production costs. Total machinery costs include repairs, maintenance, fuel, lubrication, insurance, interest, and depreciation. Depreciation is the by-product of normal wear and tear associated with equipment use, as well as obsolescence and natural deterioration. Farm capital consumption in 1996 was more than $16 billion, nearly 10% of the total farm production costs (USDA-ERS). Given the importance of these costs in agriculture, it is not surprising that agricultural economists and engineers have long had an interest in estimating functions to predict equipment depreciation costs (Butz and Lloyd; Peacock and Brake; Leatham and Baker; Reid and Bradford; Perry, Bayaner, and Nixon; Cross and Perry 1995). Depreciation functions have a variety of uses to researchers and extension specialists. They are commonly used to calculate depreciation and salvage values for equipment when putting together en
