What Happened to the Knowledge Economy? ICT, Intangible Investment, and Britain's Productivity Record Revisited

31 Pages Posted: 15 Oct 2009

See all articles by Mauro Giorgio Marrano

Mauro Giorgio Marrano

affiliation not provided to SSRN

Jonathan Haskel

Imperial College Business School

Gavin Wallis

affiliation not provided to SSRN

Abstract

Despite the apparent importance of the “knowledge economy,” U.K. macroeconomic performance appears unaffected: investment rates are flat, and productivity has slowed. We investigate whether measurement issues might account for this puzzle. The standard National Accounts treatment of most spending on “knowledge” or “intangible” assets is as intermediate consumption. Thus they do not count as either GDP or investment. We ask how treating such spending as investment affects some key macro variables, namely, market sector gross value added (MGVA), business investment, capital and labor shares, growth in labor and total factor productivity (TFP), and capital deepening. We find: (a) MGVA was understated by about 6 percent in 1970 and 13 percent in 2004; (b) instead of the business investment/MGVA ratio falling since 1970 it has been rising; (c) instead of the labor share being flat since 1970 it has been falling; (d) growth in labor productivity and capital deepening has been understated and growth in TFP overstated; and (e) TFP growth has not slowed since 1990 but has been accelerating.

Suggested Citation

Marrano, Mauro Giorgio and Haskel, Jonathan E. and Wallis, Gavin, What Happened to the Knowledge Economy? ICT, Intangible Investment, and Britain's Productivity Record Revisited. Review of Income and Wealth, Vol. 55, Issue 3, pp. 686-716, September 2009. Available at SSRN: https://ssrn.com/abstract=1489045 or http://dx.doi.org/10.1111/j.1475-4991.2009.00344.x

Mauro Giorgio Marrano (Contact Author)

affiliation not provided to SSRN

No Address Available

Jonathan E. Haskel

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

Gavin Wallis

affiliation not provided to SSRN

No Address Available

Register to save articles to
your library

Register

Paper statistics

Downloads
2
Abstract Views
446
PlumX Metrics