Hostname: page-component-cd9895bd7-q99xh Total loading time: 0 Render date: 2024-12-22T14:37:51.217Z Has data issue: false hasContentIssue false
  • English
  • Français

Can Intangible Investment Explain the UK Productivity Puzzle?

Published online by Cambridge University Press:  26 March 2020

Peter Goodridge ,
Jonathan Haskel  and
Gavin Wallis
Peter Goodridge*
Affiliation:
Imperial College Business School
Jonathan Haskel*
Affiliation:
Imperial College Business School and CEPR, IZA
Gavin Wallis*
Affiliation:
University College London and Bank of England
*
E-mail: [email protected].
E-mail: [email protected].
E-mail: [email protected].
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper investigates whether intangibles might explain the UK productivity puzzle. We note that since the recession: (a) firms have upskilled faster than before; (b) intangible investment in R&D and software has risen whereas tangible investment has fallen; and (c) intangible and telecoms equipment investment slowed in advance of the recession. We have therefore tested to see if: (a) what looks like labour hoarding is actually firms keeping workers who are employed in creating intangible assets; and (b) the current slowdown in TFP growth is due to the spillover effects of the past slowdown in R&D and telecoms equipment investment. Our main findings are: (a) measured market sector real value added growth since the start of 2008 is understated by 1.6 per cent due to the omission of intangibles; and (b) 0.75 per cent per annum of the TFP growth slowdown can be accounted for by the slowdown in intangible and telecoms investment in the early 2000s. Taken together intangible investment can therefore account for around 5 percentage points of the 16 per cent productivity puzzle.

Keywords

Intangible investmentproductivityO47E22
Type
Research Articles
Information
National Institute Economic Review , Volume 224 , May 2013 , pp. R48 - R58
Copyright
Copyright © 2013 National Institute of Economic and Social Research

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

We are very grateful for financial support for this research from NESTA, ESRC (Grant ES/1035781/1) and UK-IRC. We also thank three anonymous referees and an editor for useful comments and suggestions. This work contains statistical data from ONS which is Crown copyright and reproduced with the permission of the controller of HMSO and Queen's Printer for Scotland. The use of the ONS statistical data in this work does not imply the endorsement of the ONS in relation to the interpretation or analysis of the statistical data. This work uses research datasets which may not exactly reproduce National Statistics aggregates. The views expressed in this paper are those of the authors and do not necessarily reflect those of affiliated institutions. All errors are of course our own.

References

Acheson, J. (2011), ‘Quality-adjusted labour input: new quarterly estimates for 1993 to 2009 and annual estimates from 1970’, Economic and Labour Market Review, April, available at www.ons.gov.uk/ons/rel/icp/quality-adjusted-labour-input-experimental-/new-quarterly-estimates-for-1993-to-2009-and-annual-estimates-from-1970/index.html.CrossRefGoogle Scholar
Acheson, J.Franklin, M. (2012), ‘Quality-adjusted labour input: estimates to 2010’, available at www.ons.gov.uk/ons/dcp171766_266826.pdf.Google Scholar
Adams, J.D., Black, G.C., Clemmons, J.R.Stephan, P.E. (2005), ‘Scientific teams and institutional collaborations: evidence from U.S. universities, 1981–1999’, Research Policy, 34, 3, pp. 259–85.Google Scholar
Basu, S., Fernald, J.G.Kimball, M.S. (2006), ‘Are technology improvements contractionary?’, The American Economic Review, 96, 5, December, pp. 1418–48.Google Scholar
Broadbent, B. (2012), ‘Productivity and the allocation of resources’, speech given at Durham Business School, available at: www.bankofengland.co.uk/publications/Documents/speeches/2012/speech599.pdf.Google Scholar
Corrado, C.A. (2010), ‘Communication capital, Metcalfe's Law, and U.S. productivity growth’, paper prepared for the conference, Cornucopia Quantified, May 21–22.Google Scholar
Corrado, C., Hulten, C.Sichel, D. (2005), ‘Measuring capital and technology: an expanded framework’, in Corrado, C., Haltiwanger, J. and Sichel, D. (eds), Measuring Capital in the New Economy, National Bureau of Economic Research Studies in Income and Wealth, 65, pp. 11–45, The University of Chicago Press.Google Scholar
Dale, S. (2011), ‘Productivity and monetary policy’, speech given at the South Tyneside Manufacturing Forum, available at: www.bankofengland.co.uk/publications/Documents/speeches/2011/speech519.pdf.Google Scholar
Ding, D., Levin, S., Stephan, P.Winkler, A. (2010), ‘The impact of information technology on scientists’ productivity, quality and collaboration patterns’, Management Science, 56, 9, pp. 1439–61.Google Scholar
Disney, R., Jin, W.Miller, H. (2013), ‘The productivity puzzles’, in The IFS Green Budget 2013.Google Scholar
Fernald, J. (2010), ‘A quarterly, utilization-adjusted series on total factor productivity’, FRBSF Working Paper.Google Scholar
Disney, R., Jin, W.Miller, H. (2012), ‘Productivity and potential output before, during, and after the Great Recession’, Working Paper Series 2012–18, Federal Reserve Bank of San Francisco.Google Scholar
Goodridge, P., Haskel, J.Wallis, G. (2012a), ‘UK innovation index: productivity and growth in UK Industries’, Nesta Working Paper 12/09, available at www.nesta.org.uk/publications/working_papers/assets/features/uk_innovation_index_productivity_and_growth_in_uk_industries.Google Scholar
Goodridge, P., Haskel, J.Wallis, G. (2012b), ‘Spillovers from R&D and other intangible investment: evidence from UK industries.Google Scholar
Goodridge, P., Haskel, J.Wallis, G. (2013), ‘The contribution of the internet and telecommunications capital to UK market sector growth, forthcoming and available on request.Google Scholar
Griliches, Z. (1973), ‘Research expenditures and growth accounting’, in Williams, B. (ed.), Science and Technology in Economic Growth, Cambridge, New York, Macmillan.CrossRefGoogle Scholar
Hughes, A.Saleheen, J. (2012), ‘UK labour productivity since the onset of the crisis – an international and historical perspective’, available at www.voxeu.org/article/labour-productivity-and-global-crisis-historical-perspective.Google Scholar
Martin, B.Rowthorn, R. (2012), ‘Is the British economy supply constrained? A renewed critique of productivity pessimism’, available at www.cbr.cam.ac.uk/pdf/BM_Report3.pdf.Google Scholar
ONS (2012a), ‘The productivity conundrum, interpreting the recent behaviour of the economy’, available at www.ons.gov.uk/ons/rel/elmr/the-productivity-conundrum/interpreting-the-recent-behaviour-of-the-economy/art-interpreting-the-recent-behaviour-of-the-economy.html.Google Scholar
ONS (2012b), ‘The productivity conundrum, explanations and preliminary analysis’, available at www.ons.gov.uk/ons/rel/elmr/the-productivity-conundrum/explanations-and-preliminary-analysis/art-explanations-and-preliminary-analysis.html.Google Scholar
ONS (2013), ‘Micro-data perspectives on the UK productivity conundrum’, available at www.ons.gov.uk/ons/rel/icp/microdata-perspectives-on-the-uk-productivity-conundrum/january-2013/micro-data-perspectives-on-the-uk-productivity-conundrum.html.Google Scholar
Weale, M. (2012), ‘The labour market, productivity and inflation’, speech given at the Manchester Economics Seminar, Manchester, available at: www.bankofengland.co.uk/publications/Documents/speeches/2012/speech621.pdf.Google Scholar