Intangible Capital, TFP Growth and Green Shoots in New Productivity Data

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Abstract

This article undertakes a comparative productivity analysis for European economies, Japan, the UK, and the U.S. using the EUKLEMS & INTANProd database — the first cross-country productivity database including all Corrado-Hulten-Sichel intangible assets in a national accounts-consistent framework. Using a stylized upstream/downstream production model, the article finds that including all intangibles lowers measured TFP growth (as more of the residual is attributed to capital). For the 2014-2019 period, after adjusting for mismeasured prices for consumer digital services, green shoots of improving intangible-capital performance can be observed. Weakening knowledge diffusion mechanisms are identified as a binding constraint on productivity growth.

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