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Title What happened to the knowledge economy? ICT, intangible investment, and Britain's productivity record revisited.
Author Mauro Giorgio Marrano, Jonathan Haskel, Gavin Wallis
Year 2009
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.
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Available on request. Please email Catherine Edlin on c.edlin@ic.ac.uk
Remarks Published in The Review of Income and Wealth
Series 55, Number 3, September 2009.
Topic revision: r1 - 02 Sep 2009, JonathanHaskel
 

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