UK Innovation Index: Productivity and Growth in UK Industries

79 Pages Posted: 28 Sep 2012

See all articles by Peter Goodridge

Peter Goodridge

Imperial College Business School

Jonathan Haskel

Imperial College Business School; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Gavin Wallis

University College London

Date Written: July 2012

Abstract

This paper provides an update of the NESTA Innovation Index and tries to calculate some facts for the 'knowledge economy'. Building on the work of Corrado, Hulten and Sichel (CHS, 2005,9), using new data sets and a new micro survey, we (1) document UK intangible investment and (2) see how it contributes to economic growth. Regarding investment in knowledge/intangibles, we find (a) this is now 34% greater than tangible investment, in 2009, £124.2bn and £92.7bn respectively; (b) that R&D is about 11% of total intangible investment, software 18%, design 12%, and training and organizational capital 21% each; (d) the most intangible-intensive industry is manufacturing (intangible investment is 17% of value added) and (e) treating intangible expenditure as investment raises market sector value added growth in the 1990s due to the ICT investment boom, but has less impact on aggregate measures of growth in the 2000s. Regarding the contribution to growth, for 2000-09, (a) intangible capital deepening accounts for 26% of labour productivity growth, against computer hardware and telecommunications equipment combined (16%) and TFP (-0.4%); (b) adding intangibles to growth accounting lowers TFP growth by about 18 percentage points (c) capitalising R&D adds 0.04% to input growth and reduces ΔlnTFP by 0.02% and (d) manufacturing accounts for 47% of intangible capital deepening plus TFP.

Keywords: growth, innovation, intangibles

JEL Classification: 047

Suggested Citation

Goodridge, Peter and Haskel, Jonathan and Wallis, Gavin, UK Innovation Index: Productivity and Growth in UK Industries (July 2012). CEPR Discussion Paper No. DP9063, Available at SSRN: https://ssrn.com/abstract=2153514

Peter Goodridge (Contact Author)

Imperial College Business School ( email )

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

Jonathan Haskel

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom
020 7594 8563 (Phone)
020 7594 5915 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Gavin Wallis

University College London

Gower Street
London, WC1E 6BT
United Kingdom

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