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The Embodiment of Intangible Investment Goods; a Q-Theory Approach

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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.

Suggested Citation

  • Nazim Belhocine, 2010. "The Embodiment of Intangible Investment Goods; a Q-Theory Approach," IMF Working Papers 10/86, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:10/86
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    References listed on IDEAS

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    Cited by:

    1. Nazim Belhocine, 2008. "Treating Intangible Inputs as Investment Goods: the Impact on Canadian GDP," Working Papers 1215, Queen's University, Department of Economics.

    More about this item

    Keywords

    Capital; Capital goods; Economic models; Investment; Private sector; Intangible Investment; Q-Theory; Skill Premium; Investment Deflator; capital stock; investment goods; cost of capital; skilled workers; Financial Markets and the Macroeconomy;

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations

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