Investments in Intangible Assets and Australia’s Productivity Growth
Productivity Commission, 2009
216 Pages Posted: 28 May 2010
Date Written: March 26, 2009
Investment in capital is important for economic growth. But capital is not just physical assets – firms also invest in ‘intangible assets’, such as knowledge, firm specific skills and better ways of doing business. Some commentators have suggested that structural and technological changes in economies have increased the importance of investment in intangibles as a source of economic growth. It has also been suggested that the observed diversity in productivity improvements (across firms, industries and countries) is linked to investment in intangibles and its complementarities with other assets, such as information and communication technologies (ICTs). The paper addresses two questions. Has the composition of investment (including intangibles) changed over time? And does excluding intangible investment result in a distorted view of the dynamic changes in economic growth and productivity? The paper applies the CHS methodology to data for the market sector of the Australian economy to estimate the level and growth of investment in a range of intangibles. It also examines the direct contribution to conventionally-measured productivity growth of those intangibles not currently treated as investment.
Keywords: Investments, Intellectual Property
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