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Intangibles, Can They Explain the Dispersion in Return Rates?

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  • Bernd Görzig
  • Martin Gornig

Abstract

It is argued that the observed return rates on capital at firm-level have an upward bias if firms are producing with unobserved intangible capital. Using EUKLEED, a comprehensive firm level data base for Germany, this theoretical preposition is proved empirically. Furthermore, making unobserved capital observable the dispersion in return rates reduces dramatically. The results clearly support the assumption that a considerable part of the observed dispersion in return rates among firms can be contributed to unobserved capital formation in intangible capital. Firms with high input in intangibles also have an above average observed rate of return. However, the question to what extent a more intense use of intangibles can be the cause for higher return rates in the sense of both the monopoly-based and the innovation-based explanations is not answered.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.357439.de/dp1018.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 1018.

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Length: 19 p.
Date of creation: 2010
Date of revision:
Handle: RePEc:diw:diwwpp:dp1018

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Keywords: Intangible capital; Rate of return; Firm-level profitability;

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Cited by:
  1. Martin Borowiecki & Bernhard Dachs & Doris Hanzl-Weiss & Steffen Kinkel & Johannes Pöschl & Magdolna Sass & Thomas Christian Schmall & Robert Stehrer & Andrea Szalavetz, 2012. "Global Value Chains and the EU Industry," wiiw Research Reports 383, The Vienna Institute for International Economic Studies, wiiw.
  2. Szalavetz, Andrea, 2012. "Az immateriális beruházások és a nem közvetlenül a termelésben foglalkoztatottak szerepe a gazdasági felzárkózásban
    [The role intangible investments and non-production workers play in ec
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(11), pages 1187-1206.

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