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Intangible capital and economic growth

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Author Info
Carol Corrado
Charles Hulten
Daniel Sichel

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Abstract

Published macroeconomic data traditionally exclude most intangible investment from measured GDP. This situation is beginning to change, but our estimates suggest that as much as $800 billion is still excluded from U.S. published data (as of 2003), and that this leads to the exclusion of more than $3 trillion of business intangible capital stock. To assess the importance of this omission, we add intangible capital to the standard sources-of-growth framework used by the BLS, and find that the inclusion of our list of intangible assets makes a significant difference in the observed patterns of U.S. economic growth. The rate of change of output per worker increases more rapidly when intangibles are counted as capital, and capital deepening becomes the unambiguously dominant source of growth in labor productivity. The role of multifactor productivity is correspondingly diminished, and labor's income share is found to have decreased significantly over the last 50 years.

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Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2006-24.

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Date of creation: 2006
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Handle: RePEc:fip:fedgfe:2006-24

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Keywords: Economic development ; Capital ; Labor productivity;

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  1. Maximo Marinucci, Luis A. Puch & Luis A. Puch, . "Patrones Recientes de la Inversión en España crítico y algunas propuestas de reforma," Studies on the Spanish Economy 237, FEDEA. [Downloadable!]
  2. Susanto Basu & Robert Inklaar & J. Christina Wang, 2008. "The Value of Risk: Measuring the Service Output of U.S. Commercial Banks," NBER Working Papers 14615, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Ellen R. McGrattan & Edward C. Prescott, 2007. "Unmeasured Investment and the Puzzling U.S. Boom in the 1990s," NBER Working Papers 13499, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Adnrew J. Clarke & Alok Johri, 2008. "Pro-cyclical Solow Residuals without Technology Shocks," Department of Economics Working Papers 2008-02, McMaster University. [Downloadable!]
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  5. Fukao, Kyoji, 2007. "The Performance of Foreign Firms and the Macroeconomic Impact of FDI," CEI Working Paper Series 2007-4, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
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  6. Charles R. Hulten & Xiaohui Hao, 2008. "What is a Company Really Worth? Intangible Capital and the "Market to Book Value" Puzzle," NBER Working Papers 14548, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Che, Natasha Xingyuan, 2009. "The great dissolution: organization capital and diverging volatility puzzle," MPRA Paper 13701, University Library of Munich, Germany. [Downloadable!]
  8. Diego Comin & Bart Hobijn, 2007. "Implementing Technology," NBER Working Papers 12886, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Giammario Impullitti, 2008. "International Competition and U.S. R&D Subsidies: A Quantitative Welfare Analysis," Economic Reports 15-08, FEDEA. [Downloadable!]
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