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.

Intangible Assets and Investments at the Sector Level: Empirical Evidence for Germany

“…In a recent work, Corrado et al (2005Corrado et al ( , 2009henceforth CHS) proposed an approach that defines three broad categories of intangible assets: Investment in computerized information (software, computerized databases), innovative property (e.g. R&D, copyright, licences, spending on new architectural and engineering designs) and economic competencies (brand equity, firm specific human capital and organizational capital).…”

“…This procedure applies to sector 1, 5 and 6. As in Corrado et al (2005Corrado et al ( , 2009 we have furthermore assumed that 100% of software spending can be regarded as investment.…”

“…How we measure them at the sector level will be explained in the following subsections. Corrado et al (2005Corrado et al ( , 2009) propose a broad conceptualization of marketing activities by including both advertising and market research. Advertising expenditure is seen as the firm's primary investment into brand equity.…”

“…Furthermore, investments in such intangible knowledge assets may take place in very different forms. In a recent work, Corrado et al (2005Corrado et al ( , 2009; henceforth CHS) propose how to define and measure intangible assets. They distinguish three broad categories of intangibles: Business investment in computerized information, innovative property and economic competencies: Computerized information consists of investments for computer software and computerized databases.…”

Multi–factor productivity: estimates for 1994 to 2008

“…Th is uses a similar growth accounting framework, but broadens the defi nition of capital inputs beyond that currently used in the National Accounts, to include a range of intangible assets, including employer-funded training, research & development, and design. Th is follows Corrado, Hulten and Sichel (2005) and is described further in Clayton, Dal Borgo and Haskel (2008).…”