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What Happened To The Knowledge Economy? Ict, Intangible Investment, And Britain'S Productivity Record Revisited

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Author Info
Mauro Giorgio Marrano
Jonathan Haskel
Gavin Wallis

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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. Copyright 2009 The Authors. Journal compilation International Association for Research in Income and Wealth 2009.

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Article provided by Blackwell Publishing in its journal Review of Income and Wealth.

Volume (Year): 55 (2009)
Issue (Month): 3 (09)
Pages: 686-716
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Handle: RePEc:bla:revinw:v:55:y:2009:i:3:p:686-716

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  1. Sabine Visser, 2007. "R&D in WorldScan," CPB Memoranda 189, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
  2. Jukka Jalava & Pirkko Aulin-Ahmavaara & Aku Alanen, 2007. "Intangible Capital in the Finnish Business Sector 1975-2005," Discussion Papers 1103, The Research Institute of the Finnish Economy. [Downloadable!]
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