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The production of goods and services is central to understanding economies. The textbook description of a firm, typically in agriculture or manufacturing, focuses on its physical “tangible” capital (machines), labor (workers), and the state of “know-how. ” Yet real-world firms, such as Apple, Microsoft, and Google, have almost no physical capital. Instead, their main capital assets are “intangible”: software, data, design, reputation, supply-chain expertise, and R&D. We discuss investment in these knowledge-based types of capital: How to measure it; how it affects macroeconomic data on investment, rates of return, and GDP; and how it relates to growth theory and practical growth accounting. We present estimates of productivity in the US and European economies in recent decades including intangibles and discuss why, despite relatively rapid growth in intangible capital and what seems to be a modern technological revolution, productivity growth has slowed since the global financial crisis.

This chapter focuses on intangible capital as source of economic growth in Europe and the United States. It (1) sets out a Jorgenson-like model for thinking about the role of knowledge investments and innovation in fostering economic growth; (2) uses standard growth accounting decompositions to illustrate the empirical relevance of intangible capital deepening as a source of growth, and (3) considers how knowledge spillovers from investments in both R&D and non-R&D intangible assets might contribute to productivity.

This paper sets out theory and measurement of how intangible investment might capture innovation and what data on intangibles look like for the EU, Japan, and the US. We also look at complementarities between information and communications technology (ICT) and intangibles, spillovers from intangibles to growth, and policy implications. Copyright 2013, Oxford University Press.

This paper uses a new cross-country cross-industry dataset on investment in tangible and intangible assets for 18 European countries and the US. We set out a framework for measuring intangible investment and capital stocks and their effect on output, inputs and total factor productivity. The analysis provides evidence on the diffusion of intangible investment across Europe and the US over the years 2000-2013 and offers growth accounting evidence before and after the Great Recession in 2008-2009. Our major findings are the following. First, tangible investment fell massively during the Great Recession and has hardly recovered, whereas intangible investment has been relatively resilient and recovered fast in the US but lagged behind in the EU. Second, the sources of growth analysis including only national account intangibles (software, R&D, mineral exploration and artistic originals), suggest that capital deepening is the main driver of growth, with tangibles and intangibles accounting for 80% and 20% in the EU while both account for 50% in the US, over 2000-2013. Extending the asset boundary to the intangible assets not included in the national accounts (Corrado, Hulten and Sichel (2005)) makes capital deepening increase. The contribution of tangibles is reduced both in the EU and the US (60% and 40% respectively) while intangibles account for a larger share (40% in EU and 60% in the US). Then, our analysis shows that since the Great Recession, the slowdown in labour productivity growth has been driven by a decline in TFP growth with relatively a minor role for tangible and intangible capital. Finally, we document a significant correlation between stricter employment protection rules and less government investment in R&D, and a lower ratio of intangible to tangible investment.

This paper examines the status of GDP compilation in 189 economies against six key criteria that describe national accounts compilation practices: whether the benchmark year is up to date, the availability and timeliness of annual and quarterly GDP, whether GDP by production and expenditure approaches are compiled independently to allow for comparisons, whether estimates by the income approach are available, and the vintage of the System of National Accounts (SNA) applied. We used publicly available information including from the IMF’s Dissemination Standards Bulletin Board (DSBB), and, for 108 developing economies, information provided by the IMF’s real sector advisors stationed in the Fund’s 10 Regional Technical Assistance Centers (RTACs). The data were compared with the UNSD and World Bank databases. We find that 50 percent of economies have acceptable benchmark years, 72 percent report timely annual GDP data, while 55 percent of economies report timely data for quarterly GDP. The study presents some conclusions for priorities of capacity development.

This paper provides a growth accounting analysis of the sources of labor productivity growth in the business sector of 13 EU Member States and the US in the years 1995-2009. The aim of the analysis is to provide new evidence on the role of intangible and ICT capital as drivers of economic growth. We adopt the approach first proposed by Corrado, Hulten and Sichel and we extend the standard growth accounting model treating a broad range of firm expenditures for intangibles as investments that create future value. Our main results are the following: Capitalizing intangibles increases labor productivity growth in the period 1995-2009 with respect to labor productivity growth estimated from current national accounts data; Capital deepening was the dominant source of growth in 11 out of the 14 countries included in the analysis and in the other three its contribution was very close to the contribution of multi factor productivity growth; The contribution of ICT capital and Intangible non-ICT capital to labor productivity growth was quite high in all countries that performed relatively well in terms of labor productivity growth; When focusing on the US and the EU15 countries, there is a positive relationship between the growth of ICT and Intangible non-ICT capital deepening and the growth of multifactor productivity.

We present a harmonized data set on intangible investment for a number of EU countries and an analysis of growth.

This paper provides evidence about the diffusion of intangible investment across the EU27 member countries and investigates the role of intangible capital as a source of growth to improve our understanding of the international differences in the mix of drivers of productivity growth across Europe. Our study shows that the capitalization of intangible assets, allow identifying additional sources of long-run growth. We show that intangibles have been a relevant source of growth across European countries and that they cannot be omitted from national accounts. In particular, the ―unexplained‖ component of macro-economic dynamics, the Total Factor Productivity, becomes less important, while physical capital turns out to be strongly complementary with intangible capital.

The paper presents a growth accounting exercise for the Italian economy over the last twenty years to assess the role of primary inputs and total factor productivity. The exercise was run at both the aggregate and the disaggregated level. For the first time in Italy it used a measure of capital services, disaggregated into several different components. Special attention was paid to the accumulation of ICT capital goods. A productive capital stock database was prepared, disaggregated by asset and sector, and the respective user costs, adjusted for fiscal factors, were calculated. In the period 1981-2001 total factor productivity contributed for less than one fourth to the Italian economic growth, and in the second half of the nineties TFP decelerated significantly. The largest contribution to economic activity was made by capital formation and specifically by assets not directly linked to new technologies, whose contribution was very small. The service sector, in particular transport and communications and financial intermediation, contributed most to the growth of TFP. In financial intermediation sector the role played by ICT capital was very substantial.

There is now a large consensus that both the production and the use of Information and Communication Technology (ICT) have contributed substantially to the aggregate productivity revival in the United States in the late 1990s. The technological revolution has now involved also Italy; therefore it is fundamental to quantify the impact of ICT on the Italian production system. The growth-accounting framework is widely used to deal with such issues. To develop this kind of analysis it is crucial to have a measure of the flow of capital services provided by ICT capital goods. In this paper, referring to the standard neoclassical approach to capital services measurement, we calculate the productive capital stock, the flow of capital services provided by ICT and non-ICT capital goods and their contributions to the growth of total capital services. We provide the estimate of productive capital stocks for a detailed asset-type classification system and we report both aggregate and industry level results for the Italian economy in the last twenty years. We find that even if ICT Italian investment expenditure grew at a considerable pace in the last twenty years, its growth it is still small if compared with total investment expenditure. However, our results show that its contribution to the growth of total capital input is not negligible when capital input is measured in terms of flow of capital services. Our results in terms of productive capital stock partially confirm the importance of ICT capital accumulation for capital input growth in Italy in the second half of the 90s with respect to 1980-95 time period. Our findings are that in terms of ICT contribution to the growth of total capital services, the 80's were as much "ICT oriented" as the 90's.