Intangible Assets Measuring and Enhancing Their Contribution to Corporate Value and Economic Growth (2009) / Chapter Skim
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3 Macroeconomic Implications of Intangible Assets
3 Macroeconomic Implications of Intangible Assets
Pages 21-38
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From page 21... ...
EMPIRICAL IMPLICATIONS OF CAPITALIZING INTANGIBLES IN U.S. ECONOMIC ACCOUNTS Carol Corrado presented a set of empirical results indicating that measured patterns of growth depend significantly on how spending by firms is categorized.
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From page 22... ...
And, despite the flattening of intangible investment relative to output in the early parts of this decade, if BEA were to capitalize the remaining CHS intangibles, saving rates and capital accumulation would have been higher; for example, the value of capital would have been more than $3 trillion higher in 2003; and the updated estimates show the value of intangible assets at more than $5 trillion in 2006, nearly $4 trillion higher than those currently capitalized in the national accounts. In new work, Corrado and Hulten have built a system for producing macroeconomic estimates of output and productivity including intangibles from 1959 to 2007 (the CHS work covered the period from 1973 to 2003)
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From page 23... ...
As in the original CHS work, the new framework enables the modeling of production and capital accumulation resulting from innovative investments and knowledge appropriation, and it expresses the effects of advances in knowledge through two mechanisms rather than one. Because knowledge capital, unlike most plant and equipment, is nonrival, its benefits can diffuse through the economy without necessarily diminishing the quantity available to the original producer or to the original innovator.
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From page 24... ...
This makes sense: To the extent that intangible investments represent previously unmeasured inputs to the innovation process, a broader macro-level indicator of the innovation process has been created. Business capital investment is a key macro data series, and an updated measure including intangibles would help researchers and analysts better understand sources of and trends in productivity and innovation growth.
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From page 25... ...
• The results of the earlier CHS work seem to be bolstered by subsequent research. In terms of the sensitivity of the results to the many assump tions that were needed for the analysis, what has been learned is that the choice of price deflators used to estimate intangible investment in real terms make a big difference on measured growth of real output and capital input.
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From page 26... ...
Finally, they capitalized software, a method that the official Statistics Bureau had not yet implemented. Even with these adjustments, the authors still observed the slowdown in labor productivity growth and total factor productivity growth for 1995-2000.
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For every British pound of tangible investment, the authors found, more or less, a British pound of intangible investment as well. The numbers for both nations, Haskel reported, look remarkably similar.
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the gradual fall in labor productivity over this period using the existing national accounts conventions (without intangibles)
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From page 29... ...
United States United Kingdom 1995-2003 1995-2003 Intangible capital deepening Computerized information 32 31 Innovative property 26 24 Scientific 10 1 Nonscientific 17 24 Economic competencies 42 45 Brand equity 10 6 Firm-specific resources 32 39 SOURCE: Workshop presentation by Jonathan Haskel; see also Marrano et al. (2009:Table 6)
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From page 30... ...
" Haskel reported that the innovation survey was yielding mixed results in terms of the value of the data. The British Community Innovation Survey, as follow-up to the "Did you innovate?
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When Japanese firms introduce ICT, such as an ICT system for customer services or the management of information flows within the firm, they prefer custom software in order to get around the reorganization and training of workers. This results in a smaller measured productivity improvement from ICT investment and suggests that it is important to compare intangible investment in Japan with that in other developed economies.
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From page 32... ...
The authors also conducted growth accounting of intangibles by sector, in which they found that the contribution of intangible capital deepening to labor productivity growth is relatively large in manufacturing and relatively small in the service sectors. In discussing these results, Fukao noted that the divergent patterns of measured intangible investment between Japan and the other countries reflects, in part, differences in data sources and the definition of intangible investment.
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From page 33... ...
SOURCE: Workshop presentation by Kyoji Fukao (Hitotsubashi University and RIETI) , based on EU KLEMS database, March 2008; JIP database, 2008; KIP database.
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From page 34... ...
Japan US 26 26 24 24 Tangible investment 22 22 Intangible investment 20 20 18 18 Tangible investment 16 16 Intangible investment Percentage Percentage 14 14 12 12 10 10 8 8 6 6 1981 1981 1991 1991 1997 1997 1987 1987 1982 1982 1992 1993 1992 1993 1983 1989 1985 1994 1995 1983 1989 1985 1994 1995 1980 1998 1999 1984 1986 1988 1980 1984 1986 1988 1998 1999 1996 1996 1990 1990 2001 2001 2005 2002 2002 2003 2003 2004 2000 2000 FIGURE 3-5 Investment as a percentage of output. SOURCE: Workshop presentation by Kyoji Fukao (Hitotsubashi University and RIETI)
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From page 35... ...
off-the-job training, such accumulation of human capital will theoretically be reflected in their wage rates. Since, in standard growth accounting, wage increases by age are already taken into account as improvements in labor quality, there is a risk of double counting.
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From page 36... ...
The analysis indicates that, if on-thejob training costs are taken into account, the ratio of intangible investment to GDP in Japan is actually higher than that in the United States or the United Kingdom. Figure 3-7 shows the investment levels under different measurement scenarios.
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From page 37... ...
• Japan's intangible investment is characterized by high levels of investment in R&D but very little in economic competencies. And the contribution of intangible capital deepening to labor productivity growth is relatively large in manufacturing but small in the service sector.
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From page 38... ...
If the process is modeled, one may observe very short lives for knowledge capital.
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