Intangible Capital and Economic Growth

Abstract

Published macroeconomic data traditionally exclude most intangible investment from measured GDP. This situation is beginning to change, but our estimates suggest that as much as $800 billion is still excluded from U.S. published data (as of 2003), and that this leads to the exclusion of more than $3 trillion of business intangible capital stock. To assess the importance of this omission, we add capital to the standard sources-of-growth framework used by the BLS, and find that the inclusion of our list of intangible assets makes a significant difference in the observed patterns of U.S. economic growth. The rate of change of output per worker increases more rapidly when intangibles are counted as capital, and capital deepening becomes the unambiguously dominant source of growth in labor productivity. The role of multifactor productivity is correspondingly diminished, and labor's income share is found to have decreased significantly over the last 50 years.

Solow residuals without capital stocks

“…Such applications the transition to a market economy, the introduction of ICT capital in the production process, and the increasing employment of weightless assets such as advertising goodwill and research and development knowledge. (Corrado, Hulten, and Sichel (2006)) Both proposed alternatives to the Solow-Thörnqvist meaures can be thought of as a "marginalization" of the error carried forward by the capital stock across time. Most recent investment is most likely to be properly valued at acquisition cost and to be fully utilized.…”

Financial Disclosure and the Board: A Case for Non-Independent Directors

“…On the one hand, they have long-term relationships with the firm -a convenient way to develop firm-specific expertise -while their interests remain a priori distinct from those of the executive managerial team. On the other hand, workforce training in firm-specific capabilities and labor organization are two of the main components of intangible performance drivers: Corrado et al (2006) estimate in the US case for the period 1995-2003 that investments aimed at enhancing human resources (training, labor organization including strategic planning) accounted for one third of total investment in intangible assets. Furthermore, while they observe that, for the same period, investments in intangibles accounted for 27% of the annual growth, they note that the contribution of training and organizational innovation amounts to one third of this 27%.…”

Intangible Capital and China’s Economic Growth: Evidence from Input–Output Tables

“…For example, Gourio and Rudanko (2014b) proxy selling, general and administrative expenses (S&GA) for investment in customer capital, while Tronconi and Marzetti (2011) and Eisfeldt and Papanikolaou (2014) proxy S&GA for investment in organisational capital. Although this assumption is often found to be invalid, it is the best this study could adopt based on the available data; and, if this assumption is true, the study will avoid the inaccurate measurement problems found in Corrado et al (2009) and Fukao et al (2009).…”

“…Unlike Corrado et al (2009), Fukao et al (2009 and Hulten and Hao (2012), however, this study uses a proxy approach-that is, we use the entries relevant to intangible investment as proxies and make the assumption that the ratios of intangible investments to the proxies remain constant over time. Using the proxy approach and assuming the ratio of true value to proxies is constant over time are also common in the literature on intangible capital.…”

“…This study uses data from input-output tables and a methodology adopted from Corrado et al (2009) to provide empirical evidence of the role of intangible capital in China according to industrial sector. In so doing, it offers a new methodology for measuring the role of intangible capital in a country where data on intangible capital are inadequate.…”