Measuring Capital and Technology: An Expanded Framework

Abstract

Business outlays on intangible assets are usually expensed in economic and financial accounts. Following Hulten (1979), this paper develops an intertemporal framework for measuring capital in which consumer utility maximization governs the expenditures that are current consumption versus those that are capital investment. This framework suggests that any business outlay that is intended to increase future rather than current consumption should be treated as capital investment. Applying this principle to newly developed estimates of business spending on intangibles, we find that, by about the mid-1990s, business investment in intangible capital was as large as business investment in traditional, tangible capital. Relative to official measures, our framework portrays the U.S. economy as having had higher gross private saving and, under plausible assumptions, fractionally higher average annual rates of change in real output and labor productivity from 1995 to 2002.

Knowledge Spillovers, ICT and Productivity Growth

“…INTAN‐Invest provides cross‐country data for the full range of intangible assets as set out in Corrado et al . (). The estimates cover market sector intangibles for EU27 member countries, plus Norway and the United States from 1995 to 2005; the EU15 economies, the US, and the Czech Republic and Slovenia are covered through 2010.…”

“…Work on intangible capital expands the core concept of business investment in national accounts by treating business spending on ‘intangibles’ – computerized databases, R&D, design, brand equity, firm‐specific training and organizational efficiency – as investment (e.g. see Corrado, Hulten and Sichel, ). When this expanded view of investment is included in a sources‐of‐growth analysis, intangible capital is found to account for one‐fifth to one‐third of labour productivity growth in the market sector of advanced economies…”

SME Performance and Public Support for International RJVs*

“…Corrado et al () distinguish three main categories of intangibles: (1) computerized information; (2) innovative property; and (3) economic competencies. The last one, which refers to brand equity, human capital training and organisational management, is beyond the scope of this work because of the lack of data.…”

Productivity and Growth in UK Industries: An Intangible Investment Approach*

“…To do this, this article implements the framework set out in the widely‐cited articles by Corrado, Hulten and Sichel (2005; henceforth, CHS), and first applied in a UK setting in Giorgio Marrano, Haskel and Wallis (2009). Whilst CHS builds upon the methods of capitalising tangible assets, and intangible assets such as software which are now capitalised in national accounts, it was the first article to broaden the approach to a fuller range of intangible or knowledge assets 2 .…”