Intangible Capital and Economic Growth
Carol A. Corrado
The Conference Board; Georgetown University - Center for Business and Public Policy
Daniel E. Sichel
Wellesley College; NBER
Charles R. Hulten
University of Maryland - Department of Economics; National Bureau of Economic Research (NBER)
FEDS Working Paper No. 2006-24
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 intangible 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.
Number of Pages in PDF File: 52
Keywords: Economic growth, investment, intangibles, capital, productivity, economic measurement
JEL Classification: O47, E22, E01
Date posted: November 10, 2006
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