Treating Intangible Inputs as Investment Goods: The Impact on Canadian GDP

24 Pages Posted: 20 Oct 2009

Multiple version iconThere are 2 versions of this paper

Date Written: August 30, 2008

Abstract

National income accounts view most business expenditures on intangible goods as acquisitions of intermediate inputs that get entirely used up in the production of final output. After arguing against this convention, I construct a data set to document firms’ expenditures on an identifiable list of intangible items for which there is now wide agreement among national accountants. I then examine the implications of treating intangible spending as an acquisition of final (investment) goods on GDP growth for Canada. I find that investment in intangible capital by 2002 is almost as large as the investment in physical capital. This result is in line with similar findings for the U.S. and the U.K. Furthermore, the growth in GDP and labor productivity may be underestimated by as much as 0.1 percentage point per year during this same period. The discussion on the need to capitalize intangibles and the magnitude of the findings demonstrate the necessity to report such expenditures as investments and to collect this data as an integral part of the Canadian system of national income accounts.

Keywords: Intangible Capital Goods, Intangible Investment

JEL Classification: O47, O33, E22

Suggested Citation

Belhocine, Nazim, Treating Intangible Inputs as Investment Goods: The Impact on Canadian GDP (August 30, 2008). Available at SSRN: https://ssrn.com/abstract=1490660 or http://dx.doi.org/10.2139/ssrn.1490660

Nazim Belhocine (Contact Author)

International Monetary Fund ( email )

700 19th Street NW
Washington, DC 20431
United States

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