Work

What Happened to the Knowledge Economy? Ict, Intangible Investment, and Britain's Productivity Record Revisited

Year: 2009

Type: article

Abstract: 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.

Source: Review of Income and Wealth

DOI: 10.1111/j.1475-4991.2009.00344.x

Authors: Mauro Giorgio Marrano, Jonathan Haskel, Gavin Wallis

Institutions: His Majesty's Treasury, Center for Economic and Policy Research, Imperial College London, University College London

Language: English

Topic: Economic Growth and Productivity

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: bronze

Funders: Institute of Management Research, College of Business Administration Seoul National University, Engineering and Physical Sciences Research Council, Economic and Social Research Council