Can intangible investment explain the UK productivity puzzle?
AbstractThis paper investigates whether intangibles might explain the UK productivity puzzle. We note that since the recession: (a) firms have upskilled faster than before; (b) intangible investment in R&D and software has risen whereas tangible investment has fallen; and (c) intangible and telecoms equipment investment slowed in advance of the recession. We have therefore tested to see if: (a) what looks like labour hoarding is actually firms keeping workers who are employed in creating intangible assets; and (b) the current slowdown in TFP growth is due to the spillover effects of the past slowdown in R&D and telecoms equipment investment. Our main findings are: (a) measured market sector real value added growth since the start of 2008 is understated by 1.6 per cent due to the omission of intangibles; and (b) 0.75 per cent per annum of the TFP growth slowdown can be accounted for by the slowdown in intangible and telecoms investment in the early 2000s. Taken together intangible investment can therefore account for around 5 percentage points of the 16 per cent productivity puzzle.
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Bibliographic InfoPaper provided by Imperial College, London, Imperial College Business School in its series Working Papers with number 11140.
Date of creation: 24 May 2013
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Other versions of this item:
- Peter Goodridge & Jonathan Haskel & Gavin Wallis, 2013. "Can Intangible Investment Explain the UK Productivity Puzzle?," National Institute Economic Review, National Institute of Economic and Social Research, vol. 224(1), pages R48-R58, May.
- O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-06-09 (All new papers)
- NEP-BEC-2013-06-09 (Business Economics)
- NEP-EFF-2013-06-09 (Efficiency & Productivity)
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