Mauro Giorgio Marrano (Queen Mary, University of London and CeRiBA) Jonathan Haskel () (Queen Mary, University of London, AIM, CeRiBA, CEPR and IZA) Gavin Wallis (University College London)
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A major puzzle is that despite the apparent importance of innovation around the "knowledge economy", UK macro performance appears unaffected: investment rates are flat, and productivity has slowed down. We investigate whether measurement issues might account for the 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 labour shares, growth in labour and total factor productivity, and capital deepening. We find (a) MGVA was understated by about 6% in 1970 and 13% in 2004 (b) instead of the nominal business investment/MGVA ratio falling since 1970 it is has been rising (c) instead of the labour compensation/MGVA ratio being flat since 1970 it has been falling (d) growth in labour productivity and capital deepening has been understated and growth in total factor productivity overstated (e) total factor productivity growth has not slowed since 1990 but has been accelerating.
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Paper provided by Queen Mary, University of London, Department of Economics in its series Working Papers with number
603.
Find related papers by JEL classification: 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 - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth
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Sabine Visser, 2007.
"R&D in WorldScan,"
CPB Memoranda
189, CPB Netherlands Bureau for Economic Policy Analysis.
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