Intangible Capital and Modern Economies
Journal of Economic Perspectives
vol. 36,
no. 3, Summer 2022
(pp. 3-28)
(Complimentary)
Abstract
The production of goods and services is central to understanding economies. The textbook description of a firm, typically in agriculture or manufacturing, focuses on its physical "tangible" capital (machines), labor (workers), and the state of "know-how." Yet real-world firms, such as Apple, Microsoft, and Google, have almost no physical capital. Instead, their main capital assets are "intangible": software, data, design, reputation, supply-chain expertise, and R&D. We discuss investment in these knowledge-based types of capital: How to measure it; how it affects macroeconomic data on investment, rates of return, and GDP; and how it relates to growth theory and practical growth accounting. We present estimates of productivity in the US and European economies in recent decades including intangibles and discuss why, despite relatively rapid growth in intangible capital and what seems to be a modern technological revolution, productivity growth has slowed since the global financial crisis.Citation
Corrado, Carol, Jonathan Haskel, Cecilia Jona-Lasinio, and Massimiliano Iommi. 2022. "Intangible Capital and Modern Economies." Journal of Economic Perspectives, 36 (3): 3-28. DOI: 10.1257/jep.36.3.3Additional Materials
JEL Classification
- E22 Investment; Capital; Intangible Capital; Capacity
- E23 Macroeconomics: Production
- G31 Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
- G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- O32 Management of Technological Innovation and R&D
- O34 Intellectual Property and Intellectual Capital
- O41 One, Two, and Multisector Growth Models
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