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Treating Intangible Inputs as Investment Goods: the Impact on Canadian GDP

  • Nazim Belhocine

    ()

    (International Monetary Fund)

National income accounts view most business expenditures on intangible goods as acquisitions of intermediate inputs that get entirely used up in the production of final output. After arguing against this convention, I construct a data set to document firms’ expenditures on an identifiable list of intangible items for which there is now wide agreement among national accountants. I then examine the implications of treating intangible spending as an acquisition of final (investment) goods on GDP growth for Canada. I find that investment in intangible capital by 2002 is almost as large as the investment in physical capital. This result is in line with similar findings for the U.S. and the U.K. Furthermore, the growth in GDP and labor productivity may be underestimated by as much as 0.1 percentage point per year during this same period. The discussion on the need to capitalize intangibles and the magnitude of the findings demonstrate the necessity to report such expenditures as investments and to collect this data as an integral part of the Canadian system of national income accounts.

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File URL: http://qed.econ.queensu.ca/working_papers/papers/qed_wp_1215.pdf
File Function: First version 2008
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Paper provided by Queen's University, Department of Economics in its series Working Papers with number 1215.

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Length: 24 pages
Date of creation: Aug 2008
Date of revision:
Handle: RePEc:qed:wpaper:1215
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  1. 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.
  2. Carlos J. Serrano, 2008. "The Dynamics of the Transfer and Renewal of Patents," NBER Working Papers 13938, National Bureau of Economic Research, Inc.
  3. Carol Corrado & Charles Hulten & Daniel 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.).
  4. Nazim Belhocine, 2010. "The Embodiment of Intangible Investment Goods; A Q-Theory Approach," IMF Working Papers 10/86, International Monetary Fund.
  5. Mauro Giorgio Marrano & Jonathan Haskel, 2006. "How Much Does the UK Invest in Intangible Assets?," Working Papers 578, Queen Mary University of London, School of Economics and Finance.
  6. Carol A. Corrado & Charles R. Hulten & Daniel E. Sichel, 2006. "Intangible Capital and Economic Growth," NBER Working Papers 11948, National Bureau of Economic Research, Inc.
  7. Beckstead, Desmond & Gellatly, Guy & Baldwin, John R., 2005. "Canada's Investments in Science and Innovation: Is the Existing Concept of Research and Development Sufficient?," Economic Analysis (EA) Research Paper Series 2005032e, Statistics Canada, Analytical Studies Branch.
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