-- JonathanHaskel - 05 Jun 2007

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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 2007
Abstract A major puzzle is that despite the apparent importance of innovation around the “knowledge economy”, UK macro performance appears unaffected: investment rates are flat, and productivity has slowed down. We investigate whether measurement issues might account for the 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 labour shares, growth in labour and total factor productivity, and capital deepening. We find (a) MGVA was understated by about 6% in 1970 and 13% in 2004 (b) instead of the nominal business investment/MGVA ratio falling since 1970 it is has been rising (c) instead of the labour compensation/MGVA ratio being flat since 1970 it has been falling (d) growth in labour productivity and capital deepening has been understated and growth in total factor productivity overstated (e) total factor productivity growth has not slowed since 1990 but has been accelerating
DownloadInfo PDF:
http://www.econ.qmul.ac.uk/papers/wp/WP603.HTM
Remarks Reference:

Giorgio Marrano, M., Haskel, J., and Wallis, G., (2007), "What Happened to
the Knowledge Economy? ICT, Intangible Investment and Britain's
Productivity Record Revisited", Department of Economics, Queen Mary,
University of London, Working Paper 603, June. Available at
http://www.econ.qmul.ac.uk/papers/wp/WP603.HTM

Data for these figures is in
* figures_1,2,3.xls: Data for Figures 1, 2, 3 in Giorgio Marrano, Haskel, Wallis

Results quoted in Chancellor Alastair Darling's first speech at LBS, 25th July 2007
http://www.hm-treasury.gov.uk/newsroom_and_speeches/press/2007/press_85_07.cfm

Full review in The Economist, 2nd August 2007
http://www.economist.com/world/britain/displaystory.cfm?story_id=9597461
and
http://www.economist.com/world/britain/displaystory.cfm?story_id=9601016

Results were summarised in the Chancellor’s first PBR speech, on p.4
http://www.hm-treasury.gov.uk/pbr_csr/pbr_csr07_speech.cfm
Summarised in PBR:
a. Trailed in Para 4.2 on p.50 in Chapter 4
b. Summarised in full in a box in, Box A3, p.150 of Annex A

http://www.hm-treasury.gov.uk/d/pbr_csr07_completereport_1546.pdf

The summary in Para 4.2 reads:

“A recent HM Treasury Economic Working Paper,1 described in Box A3,
investigates the consequences for the measurement of productivity of
treating spending on intangible assets as investment. It finds that
traditional measurement techniques may underestimate the importance of
investment in intangibles in driving productivity growth in recent
years, highlighting the importance to the UK economy of science,
innovation and knowledge-based industries.”

Slightly revised version of the paper published as Treasury Economic Working Paper Number 1.

http://www.hm-treasury.gov.uk/pbr_csr07_intangible.htm

Reviewed in the 2008 Budget, Para B.71
http://www.hm-treasury.gov.uk/d/bud08_completereport.pdf

Topic attachments
I Attachment Action Size Date Who Comment
Knowl_Econ_Non-technical_summary.pdfpdf Knowl_Econ_Non-technical_summary.pdf manage 18.2 K 31 Oct 2008 - 15:08 JonathanHaskel  
figures_1,2,3.xlsxls figures_1,2,3.xls manage 105.5 K 31 Oct 2008 - 15:08 JonathanHaskel Data for Figures 1, 2, 3 in Giorgio Marrano, Haskel, Wallis
growth_intang_UK05June07.pdfpdf growth_intang_UK05June07.pdf manage 0.1 K 31 Oct 2008 - 15:08 JonathanHaskel  
Topic revision: r7 - 25 May 2009, JonathanHaskel
 

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