Intangible Capital and Growth in Advanced Economies: Measurement and Comparative Results

Conventional measures of business investment consist primarily of tangible assets such as plant and equipment, vehicles, office buildings and other commercial structures. Corrado, Hulten and Sichel (2005, 2009) show business investment in intangibles (software, design, R&D, branding, organizational capital) exceeds tangible investment for the United States. This paper presents a harmonized data set and analysis of intangible investment, 1995-2009, for the EU27, Norway and the US, and growth accounts including intangible capital for 14 countries. We find (a) intangible investment in the EU is less than the US, but the share of intangible investment in GDP has been growing faster than the share of tangible (b) between 1995 and 2007 capital deepening accounted for almost 50% of growth in the EU and 65% in the US, with intangible investment contributing around half of capital deepening (c) higher rates of intangible capital deepening are associated with higher TFP growth, consistent with spillovers from intangibles.