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The Embodiment of Intangible Investment Goods

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  • Nazim Belhocine

Abstract

This paper extends the q-theory of investment to model explicitly the decision of firms to invest in intangibles and measures the contribution of intangible goods to the overall capital stock in the U.S. The model highlights the embodiment of intangible goods in tangibles and the role of relative price movements in the measurement of the contribution of each type of investment to the overall capital stock. The downward trend in the aggregate investment deflator series reported by national accounts is found to have a significant downward bias in the 90s. The model also shows that the growth in the overall capital stock from the late-80s until 2000 was driven mainly by an increase in the contribution of intangibles. However, the contribution of intangibles fell consistently after 2000. These results underscore the importance of accounting for the movements in the price of intangibles rather than focusing only on their rising share in overall investment.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/86.

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Length: 41
Date of creation: 01 Apr 2010
Date of revision:
Handle: RePEc:imf:imfwpa:10/86

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Keywords: Capital; Capital goods; Economic models; capital stock; investment goods; cost of capital; skilled workers; skilled labor; stock market; elasticity of substitution; capital accumulation; unit of capital; perfect competition; fixed investment; adjustment period; capital markets; perfect substitutes; equilibrium model; capital ratio; unskilled labor; capital expenditures; intermediate goods; capital good; capital adjustment; constant elasticity of substitution; capital budgeting; competitive price; capital theory; intermediate inputs; economic cooperation; relative price of capital;

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References

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  17. Carol Corrado & Charles Hulten & Daniel Sichel, 2006. "Intangible capital and economic growth," Finance and Economics Discussion Series 2006-24, Board of Governors of the Federal Reserve System (U.S.).
  18. Nazim Belhocine, 2008. "Treating Intangible Inputs as Investment Goods: the Impact on Canadian GDP," Working Papers 1215, Queen's University, Department of Economics.
  19. Kyoji Fukao & Tsutomu Miyagawa & Kentaro Mukai & Yukio Shinoda & Konomi Tonogi, 2009. "Intangible Investment In Japan: Measurement And Contribution To Economic Growth," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(3), pages 717-736, 09.
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