Intangible capital in a real business cycle model

Recent empirical studies have shown that intangible capital plays an important role in explaining productivity gains that have occurred during the last two decades. By introducing intangible capital in an otherwise standard theoretical real business cycle model, this paper aims to provide a theoretical foundation of the empirical findings. Our results indicate that investment in intangible capital is pro-cyclical. Both transitory as well as permanent productivity shocks increase investment in intangible capital. However, in case of a permanent technology shock we learn that firms allocate more labor and physical capital to the creation of intangible capital which increases future profits at the cost of current profit. We also find that investment in intangible capital plays an important role in producing endogenous movements in productivity.     

WHAT HAPPENED TO THE KNOWLEDGE ECONOMY? ICT,INTANGIBLE INVESTMENT,AND BRITAIN'S PRODUCTIVITY RECORD REVISITED

Despite the apparent importance of the "knowledge economy," U.K. macroeconomic performance appears unaffected: investment rates are flat, and productivity has slowed. We investigate whether measurement issues might account for this 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 labor shares, growth in labor and total factor productivity (TFP), and capital deepening. We find: (a) MGVA was understated by about 6 percent in 1970 and 13 percent in 2004; (b) instead of the business investment/MGVA ratio falling since 1970 it has been rising; (c) instead of the labor share being flat since 1970 it has been falling; (d) growth in labor productivity and capital deepening has been understated and growth in TFP overstated; and (e) TFP growth has not slowed since 1990 but has been accelerating.     

ESTIMATES OF INTANGIBLE INVESTMENT BY INDUSTRY AND PRODUCTIVITY GROWTH IN JAPAN

In estimating intangible investment in Japan at the industry level, we find a high intangible investment/gross value added ratio in the information technology (IT) sector and negative growth rates in intangible capital in 13 industries over the decade from 2000. When we examine the impacts of intangible investment on total factor productivity growth, we find a significant and positive effect on total factor productivity growth in the market economy. In a revised estimation that considers intertemporal knowledge spillovers, the estimated rate of return on intangibles in the IT sector is quite high after the IT revolution. The results imply that intangible assets have been underinvested in the IT sector.     

INTANGIBLE CAPITAL AND U.S. ECONOMIC GROWTH

Published macroeconomic data traditionally exclude most intangible investment from measured GDP. This situation is beginning to change, but our estimates suggest that as much as $800 billion is still excluded from U.S. published data (as of 2003), and that this leads to the exclusion of more than $3 trillion of business intangible capital stock. To assess the importance of this omission, we add intangible capital to the standard sources-of-growth framework used by the BLS, and find that the inclusion of our list of intangible assets makes a significant difference in the observed patterns of U.S. economic growth. The rate of change of output per worker increases more rapidly when intangibles are counted as capital, and capital deepening becomes the unambiguously dominant source of growth in labor productivity. The role of multifactor productivity is correspondingly diminished, and labor's income share is found to have decreased significantly over the last 50 years.     

CAN INVESTMENT IN INTANGIBLES EXPLAIN THE SWEDISH PRODUCTIVITY BOOM IN THE 1990s?

In the early 1990s the Swedish economy experienced a severe economic and financial crisis which resulted in a substantial GDP decrease. Even though the crisis was not a complete surprise for many economists, almost no one expected that the Swedish economy would be prospering with booming productivity growth only a few years later. Economists have presented three explanations for the fast recovery and productivity growth in 1995–2006: market reforms, crisis recovery, and the impact of ICT. This paper offers an alternative view, emphasizing instead firms' substantial investment in intangible assets such as R&D, design, and advertising. Based on the growth accounting framework, intangible capital accounted for more than 30 percent of the labor productivity growth in the Swedish business sector from 1995 to 2006. Thus, Swedish TFP growth, one of the highest among OECD countries, is reduced substantially when investment in intangibles is included in the growth accounting analysis.     

Information Technology and Productivity Growth in the 2000s

Abstract. US productivity growth experienced continued productivity growth after 2000 even as investment, particularly in information technology (IT), slowed. This paper uses industry-level data to examine the link between average labor productivity (ALP) growth and IT in the post-2000 period. We use difference-in-difference and cross-sectional regressions to show that the link between ALP growth and IT-intensity is weaker after 2000 than before. These results are robust to alternative measures of IT-intensity such as the IT share of capital services, the level of IT capital depth, and the share of IT capital services in total output. We conclude that the post-2000 productivity gains in the United States do not appear to have been driven directly by IT.     

Explaining Japan's Unproductive Two Decades

Using industry‐ and micro‐level data, this paper examines why Japan's productivity growth has been slow for such a long time and how it can be accelerated in the future. Japan's capital–gross domestic product ratio continued to increase after 1991, and this increase in the capital–gross domestic product ratio must have contributed to the decline in the rate of return on capital in Japan by decreasing the marginal productivity of capital. On the other hand, Japan's accumulation of information and communication technology capital and intangible investment was very slow. Compared with large firms, which enjoyed an acceleration in the total factor productivity growth in recent years, Japanese small‐ and medium‐sized enterprises were left behind in information and communication technology capital and intangible investment, and their productivity growth has been very low. Furthermore, as large firms expanded their supply chains globally and relocated their factories abroad, research and development spillovers from large firms to small‐ and medium‐sized enterprises seem to have declined.     

Imports and growth in China

In this paper, we analyze the role played by imports and investment on labor productivity and output in China from 1964 to 2004. In doing so, our analysis focuses on the role of technological progress incorporated into the Chinese economy through capital accumulation and imports, which could be a cause of significant technology transfer from abroad that facilitated industrialization and rapid growth in China. However, as we know that there could be other factors influencing economic development, we have also considered the role played by domestic innovation activities, competitiveness and foreign economic conditions. We focus on examining the short- and long-run effects of the considered variables as well as the direction of their causality. In addition, we investigate the role played by the exchange rate on growth and discuss some policy implications of this effect on the current debate on the appreciation of the Yuan. The empirical results provide evidence that both imports and investment encourage output and labor productivity in the long run, but neither investment causes imports nor imports cause investment. Moreover, we found that during the period considered the real exchange rate influenced output, but not productivity. These findings provide interesting insights on the future Chinese economic policy.     

Accounting for human capital externalities with an application to the Nordic countries

Externalities caused by human capital accumulation have taken up considerable space in theoretical work on economic growth. However, less attention has been paid to this externality in traditional growth accounting exercises. This paper takes up the issue of growth accounting, suggesting a framework for quantifying human-capital externalities and illustrating it empirically using data from the five Nordic countries. Four sources of growth are identified, i.e. capital accumulation, labor force growth, and total factor productivity growth (TFP), where the traditional TFP measure is split into a part explained by human-capital formation and an unexplained part. By doing this I am able to attribute between 12 per cent and 33 per cent of growth in the Nordic countries to human capital investment.     

Public capital formation and labor productivity growth in Chile

Following the lead of the endogenous growth literature, this article analyzes the impact on labor productivity growth of public and private investment spending in Chile. Using cointegration analysis, the results of the dynamic labor productivity function for the 1960–95 period show that (lagged) public and private investment spending, as well as the rate of growth in exports, has a positive and highly significant effect on the rate of labor productivity growth. The estimates also indicate that increases in government consumption spending have a negative effect on the rate of labor productivity growth, thus suggesting that the composition of government spending may also play an important role in determining the rate of labor productivity growth. The findings call into question the politically expedient policy in many Latin American countries of disproportionately reducing public capital expenditures to meet targeted reductions in the fiscal deficit as a proportion of GDP.     

Of Yeast and Mushrooms: Patterns of Industry-Level Productivity Growth

Abstract. In this paper we analyse labour productivity growth in the United States, four European countries (France, Germany, the Netherlands and United Kingdom), Australia and Canada between 1987 and 2003 from an industry perspective. Rather than analysing broad industry groups, we compare the pattern of growth in all industries through Harberger diagrams. We introduce new summary measures, which indicate the pervasiveness of growth patterns. These indicators show that investment in both information and communication technology (ICT) and non-ICT capital is fairly balanced or 'yeasty', driven by overall macro-economic conditions. However, growth of total factor productivity (TFP) is much more localized or 'mushroom-like'. In particular we find a clear distinction between countries in continental Europe, in which TFP is decelerating after 1995 and becoming more localized, and Anglo-Saxon countries in which TFP growth is accelerating and becoming more broad-based, especially after 2000. The increased breadth of Anglo-Saxon TFP growth is consistent with delayed effects of intangible investments that are complementary to ICT investments.     

Technological convergence, R&D, trade and productivity growth

This paper analyses productivity growth in a panel of 14 United Kingdom manufacturing industries since 1970. Innovation and technology transfer provide two potential sources of productivity growth for a country behind the technological frontier. We examine the roles played by research and development (R&D), international trade, and human capital in stimulating each source of productivity growth. Technology transfer is statistically significant and quantitatively important. While R&D raises rates of innovation, international trade enhances the speed of technology transfer. Human capital primarily affects output through private rates of return (captured in our index of labour quality) rather than measured TFP.     

Costly investment, complementarities and the skill premium

We propose a new framework to analyse the relationship between the relative high-skilled labour endowment, the skill premium and economic growth. Building on Acemoglu and Zilibotti (2001), we introduce physical capital; internal costly investment in both capital and R&D; and complementarities between intermediate goods. We only find a positive relationship between the relative labour endowment and both the skill premium and economic growth within determined intervals of relative labour endowment values, which vary with the absolute productive advantage of high over low-skilled labour. The model thus accommodates theoretically mixed empirical results on the relative labour endowment-skill premium relationship. We further find that the impact on both the relative labour endowment and the skill premium of a rise in investment costs or in the complementarities degree depends on: (i) the absolute productivity advantage of high over low-skilled labour; and (ii) the relative labour endowment.     

PRODUCTIVITY GROWTH IN LATIN AMERICA OVER THE LONG RUN

The low pace of Latin American productivity growth in recent decades, despite extensive economic reforms, has yet to be understood in a longer‐run context where factors such as demographic changes, structural shifts, and investment levels can be taken fully into account. The OxLAD database provides comparable sectoral output and workforce series over 1900–2000 for the six leading economies in the region for the first time. Our analysis of this new dataset shows that: intersectoral resource reallocation reduced aggregate productivity growth in all three periods; total factor productivity growth was low throughout the century, and even negative in the closing three decades; and thus factor accumulation—investment in fixed capital and skilled labor—was the main source of productivity growth in Latin America during the twentieth century.     

The business environment and Moroccan firm productivity

The paper focuses on the role of the business environment in understanding differences in the total factor productivity of Moroccan firms. The business environment is captured by measures which include the investment climate in which firms operate, i.e. access to credit, regulatory and institutional environment and infrastructure. The evidence on the relationship between credit and productivity is strongly indicative of credit resources misallocation in Morocco. We also find that, heavier bureaucracy and differences in regulations appear to have a negative effect on firm productivity. This last result is particularly relevant for small firms, and/or those that do not export and/or those with no access to foreign capital.     

Endogenous technological progress in a multi-sector growth model

This paper presents an endogenous growth model driven by human capital, where human capital can be allocated across three sectors: the production of the final consumption good, the educational sector and the production of technological capital (in the form of knowledge or ideas). In our model, which also includes public expenditure and population growth, labor augmenting technical progress is endogenous and this enriches the transitional dynamics of the economy. With respect to ideas-based growth models, we assume knowledge is produced according to a neoclassical technology, combining ideas and human capital. Such an assumption is motivated by empirical works showing the existence of significant decreasing returns in the creation of ideas at the aggregate level (as Kortum, 1993; and Pessoa, 2005) and of the weak relationship between some inputs of the knowledge production process (as the number of researchers) and the total factor productivity growth rate (as Jones, 2002). Under some general conditions, this economy exhibits the existence of a steady state equilibrium and an unstable multidimensional manifold. Numerical examples are provided to show the existence of stable arms.     

科技型中小企业R&D投资、人力资本投资与企业成长路径的关系

基于科技型中小企业成长的特点,将人力资本与技术资本涵盖于知识资本的范畴,在动态演化的理论框架中,构建了影响科技型中小企业演化路径的指标体系,并首次运用混合截面数据对科技型中小企业知识资本与企业演化路径的关系进行了实证研究。研究表明：在满足一定条件下,人力资本与企业成长路径变迁之间呈正相关关系,其中,研发人员比例具有显著的经济意义。同时,R&D投入对企业倾向于跳跃式突变成长有显著的正向影响,而非R&D投入与其存在负相关关系,但在控制了行业特征之后,传统制造业R&D投入效果较高科技行业更为显著。这一结果从另一侧面说明了行业特征对企业演化路径和策略选择的重要性。另外,我国科技型中小企业在成长路径选择中不存在区域比较优势。     

Fluctuations in convex models of endogenous growth, II: Business cycle properties

Using ideas from the endogenous growth literature, we present a model of the endogenous determination of productivity growth based on individual worker decisions about human capital investment. We calibrate a version of the model to match long run growth facts from the US and study the business cycle properties of this model. This approach offers improvements along several dimensions over standard exogenous growth methodologies. Most importantly, our stochastic endogenous growth model generates much greater serial correlation in output growth and labor supply volatility relative to its real business cycle counterpart. We conclude that using the extra discipline of reproducing the trend productivity growth features of the data endogenously constitutes an important missing component from the real business cycle approach.     

技术进步偏向对要素收入份额的影响——基于中国工业行业数据的研究

本文利用CES生产函数考察了技术进步偏向与资本一劳动收入份额比值之间的关系,并利用中国工业1979—2011年的数据进行了实证分析。估计结果表明：中国工业的要素替代弹性大于0小于1;资本增强型技术进步变化率小于劳动增强型技术进步变化率,1987年后工业技术进步为劳动节约型的,资本一劳动收入份额比值提高;资本深化、技术进步偏向、外商直接投资以及国际贸易是我国工业资本收入份额持续上升、劳动收入份额持续下降的主要原因,其中劳动节约型技术进步对要素收入份额失衡的影响最大。工业要素分配份额的演变直接体现了国民收入分配格局的失衡,也间接拉大了我国居民之间的收入差距。     

THE TREATMENT OF INTANGIBLE RESOURCES AS CAPITAL

The author describes the results of his current research designed to measure total investment, tangible and intangible, and the derived capital stocks for the U.S., 1929–1966. With respect to total investment, the estimates show a marked increase in its ratio to GNP. All of the increase occurs in the intangible component comprising R & D, education and training, health, and mobility. The increase was concentrated in the government sector, although households increased the proportion of disposable personal income devoted to total investment.
Consistent with the relative investment trends, the stock of intangible capital grew considerably faster than the tangible stock. The growth of total capital stocks was somewhat less than that of GNP, however, in both current and constant prices. Thus, the rate of return on total capital rose somewhat over the period. Average rates of return on human and nonhuman capital were closely similar.
In real terms, the growth of total capital stocks accounted for two-thirds of the growth in real GNP, 1929–1966. One-third of the growth is attributed to residual forces, chiefly economies of scale, changes in inherent quality of human and natural resources, changes in values and motivations, and changes in rates of utilization of capacity.
The growth of the ratio of real intangible stocks to real tangible stocks accounted for less than half of the increase in total factor productivity 1929–1966. This is significantly less than the contribution of intangibles as estimated by Denison, and the author adduces several reasons why his estimates may understate the contribution. Nevertheless, it seems that the net effect of the residual forces enumerated above must also have made a substantial contribution to the growth of tangible factor productivity and real GNP over the 37-year period.