Can intangible investment explain the UK productivity puzzle?
This 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. ? 2013 National Institute of Economic and Social Research.
|Date of creation:||17 May 2013|
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- Fernald, John G., 2014.
"Productivity and potential output before, during, and after the Great Recession,"
Working Paper Series
2014-15, Federal Reserve Bank of San Francisco.
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- John G. Fernald, 2015. "Productivity and Potential Output before, during, and after the Great Recession," NBER Macroeconomics Annual, University of Chicago Press, vol. 29(1), pages 1 - 51.
- John G. Fernald, 2012. "Productivity and potential output before, during, and after the Great Recession," Working Paper Series 2012-18, Federal Reserve Bank of San Francisco.
- John Fernald, 2014. "Productivity and Potential Output Before, During, and After the Great Recession," NBER Working Papers 20248, National Bureau of Economic Research, Inc.
- Carol Corrado & Charles R. Hulten & Daniel E. Sichel, 2004.
"Measuring capital and technology: an expanded framework,"
Finance and Economics Discussion Series
2004-65, Board of Governors of the Federal Reserve System (U.S.).
- Carol Corrado & Charles Hulten & Daniel Sichel, 2005. "Measuring Capital and Technology: An Expanded Framework," NBER Chapters, in: Measuring Capital in the New Economy, pages 11-46 National Bureau of Economic Research, Inc.
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