What Happened to the Knowledge Economy? ICT, Intangible Investment and Britain's Productivity Record Revisited
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.
|Date of creation:||Jun 2007|
|Date of revision:|
|Contact details of provider:|| Postal: London E1 4NS|
Phone: +44 (0) 20 7882 5096
Fax: +44 (0) 20 8983 3580
Web page: http://www.econ.qmul.ac.uk
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Timmer, Marcel P. & Ypma, Gerard & Ark, Bart van der, 2003. "IT in the European Union: driving productivity divergence?," GGDC Research Memorandum 200363, Groningen Growth and Development Centre, University of Groningen.
- Giorgio Marrano, Mauro & Haskel, Jonathan, 2007.
"How Much Does the UK Invest in Intangible Assets?,"
CEPR Discussion Papers
6287, C.E.P.R. Discussion Papers.
- 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.
- Carol Corrado & John Haltiwanger & Dan Sichel, 2005. "Measuring Capital in the New Economy," NBER Books, National Bureau of Economic Research, Inc, number corr05-1, September.
- Venetia Bell & Pablo Burriel-Llombart & Jerry Jones, 2005. "A quality-adjusted labour input series for the United Kingdom (1975-2002)," Bank of England working papers 280, Bank of England.
- Gavin Wallis, 2009. "Capital Services Growth in the UK: 1950 to 2006," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(6), pages 799-819, December.
- D. W. Jorgenson & Z. Griliches, 1967. "The Explanation of Productivity Change," Review of Economic Studies, Oxford University Press, vol. 34(3), pages 249-283.
- Mary Oâ€™Mahony & Willem de Boer, 2002. "Britainâ€™s Relative Productivity Performance: Has Anything Changed?," National Institute Economic Review, National Institute of Economic and Social Research, vol. 179(1), pages 38-43, January.
When requesting a correction, please mention this item's handle: RePEc:qmw:qmwecw:wp603. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Nick Vriend)
If references are entirely missing, you can add them using this form.