13° Conferenza nazionale di statistica 4-5-6 luglio 2018 # FUTURO Centro Congressi Ergife Via Aurelia, 619 Roma

1. Recent advancements in the research on intangibles:
productivity growth and new empirical challenges
Cecilia Jona-Lasinio
ISTAT - Rome (Italy)
XIII National Statistical Conference
4-5-6 July 2018
Ergife Palace - Congress Centre
Via Aurelia, 619 - Rome
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2. Capitalizing intangibles: the state of the art
Computerized
Information
Innovative
Property
Economic
Competencies
• Software development
• Database development
• R&D
• Mineral exploration
• Copyright development (artistic
originals)
• Design and other product
development costs
• Market research & advertising
• Business process investment
• Training & skill development
Broad category Type of Investment
Yes
Na5onal Accounts
No
Source: Corrado, Hulten and Sichel 2005, 2009
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3. Measuring intangible capital: where we started
The changing nature of the global economy has placed novel attention on
intangible capital as a new source of growth thus asking for coordinated
measurement efforts.
EU FP7 Funded Projects for measuring business intangibles
• INNODRIVE: new macro and firm level data on intangibles and new
estimates of the capacity of intangible capital to generate growth. Aimed at
broad coverage of intangibles.
• COINVEST: macro and micro analysis to evaluate the contribution of
intangible investments to innovation, competitiveness, growth and
productivity in Europe. Focused on in-depth country-specific research.
The two projects led to the (unfunded) INTAN-Invest research collaboration that
constructs and maintains a harmonized dataset on intangible capital investments
by industry for 28 EU countries plus the United States (www.intaninvest.net).
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4. From business to public sector estimates of intangibles
• INNODRIVE, COINVEST and INTAN-Invest made possible the
evaluation of the contribution of market sector intangibles to economic
growth.
• SPINTAN: (Funded under the EU FP7 framework) supported the effort to
develop a framework to measure intangible investment in the nonmarket
sector (see Corrado, Haskel and Jona-Lasinio (2017)).
• SPINTAN extended the asset boundary of national accounts to include
intangible investment in asset types as set out in Corrado et al. (2017), who
adapted the framework of Corrado, Hulten, and Sichel (2005, 2009) to the
nonmarket institutional sector setting (i.e, governments and nonprofit
institutions).
• The production boundary of existing GDP was unchanged, which is to say
production by households remained outside the scope of analysis.
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5. Knowledge based capital in the total economy
Mapping the CHS assets to the nonmarket sector
and consumer product and food and drug safety (i.e, investments in product reputation). The
correspondence for computer software, purchased investments in organizational capital, and
function-specific worker capital (employer-provided training) is of course far closer.
Table 3: Knowledge Capital in a Total Economy
Market Sector Nonmarket Sector
Computerized Information Information, Scientific, and Cultural Assets
1 Software 1 Software
2 Databases 2 Open data
Innovative Property
3 R&D, broadly defined to 3 R&D, basic and applied science
include all NPD costs
4 Entertainment & artistic originals 4 Cultural and heritage, including
5 Design arch. & eng. design
6 Mineral exploration 5 Mineral exploration
Economic Competencies Societal Competencies
7 Brands 6 Brands
8 Organizational capital 7 Organizational capital
(a) Manager capital (a) Professional and manager capital
(b) Purchased organizational services (b) Purchased organizational services
9 Firm-specific human capital 8 Function-specific human capital
(employer-provided training) (employer-provided training)
Note—NPD=New Product Development, including testing and spending for new financial products
and other services development not included in software or conventional science-based R&D.
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6. Market sector intangibles
• US relatively more intangible intensive than the EU economies
• NA intangibles account for 4%-3% of GDP and new intangibles for 4%-4.5%
• US intangibles outpaced tangible investment
0%
2%
4%
6%
8%
10%
12%
14%
16%
US EU14 CZ-HU-SI-SK
Intangible and tangible investment
(%GDP, average 2000-2013)
national accounts intangibles new intangibles total intangibles tangibles
Source: Corrado, Haskel, Jona-Lasinio, Iommi (2016), "Growth, tangible and intangible investment in the EU and the US before
and since the Great Recession", EIB Investment Report, 2016
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7. Composition of market intangible investment
Economic competencies are the main driver of intangible investment
0,0%
1,0%
2,0%
3,0%
4,0%
5,0%
6,0%
7,0%
8,0%
US EU14 CZ-HU-SI-SK
Asset composition of intangible investment
(%GDP, average 2000-2013)
Software Innovative Property Economic Competencies
Source: Corrado, Haskel, Jona-Lasinio, Iommi (2016), "Growth, tangible and intangible investment in the EU and the US before
and since the Great Recession", EIB Investment Report, 2016
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8. Market and nonmarket intangibles:
adjusted value added shares (2013)
Non-market intangible investment (on this measure) is small. Overall (market and
nonmarket) intangible investments account for 14% to 6% of value added with market
and nonmarket sectors accounting on average for 8% and 1.5% respectively.
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9. Why intangibles matter?
Affec%ng capital contribu%on via:
• Primary effect
• Complementary effect
(interac%ng with other assets)
Intangibles affect growth via mul%ple
channels/mechanisms
Genera%ng spillovers
(nonR&D assets are the keys)
Closed economies 9 / 22

10. Productivity slowdown and the role of intangibles
Productivity slowdown:
• Much work shows there has been a slowdown in investment and
TFP growth
• What might cause this? Can an “intangible” approach help?
From an intangible capital perspective, at least two possibilities:
• If intangible capital has spillovers, then investment slowdown
suggests a TFP growth slowdown
• If unmeasured investments in data and ML have been sizeable
(like intangible investments during the IT boom of the 1990s),
there might be a data investment-driven "innovation J-curve"
(Brynjolffson, Syverson, and Rock, 2018)
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11. Intangible investment, 1999 to 2015
0.05.1.15.2
ShareofGDP
ES IT DE AT NL UK DK FI FR US SE
Note: Ranked by intangible share. GDP adjusted to include intangibles.
(NonFarm Business, averages, 1999-2015)
Tangible and intangible shares of GDP
Tangible Intangible
Note: Nonfarm business excludes real estate.
Source: INTAN-Invest c 2018, available at www.intaninvest.net
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12. Comparison with United States
.05.1.15
1995 2000 2005 2010 20151995 2000 2005 2010 2015
Note: non-farm business. Industry-specific value added PPPs for EUNote: non-farm business. Industry-specific value added PPPs for EU
EU11 US
Intangible share Tangible share
Shareofintangible-adjustedGDP
Year
Graphs by group_Country
(Share of intangible-adjusted GDP, US+EU11)
Tangible and intangible investment
Note: EU aggregregation uses Eurostat’s industry-specific production side PPPs.
Source: INTAN-Invest c 2018, available at www.intaninvest.net
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13. TFP in EU grew very slowly from 2011 to 2015,
intangible capital deepening slowed
0.01.02.030.01.02.03
QH LH KH_tan KH_int TFP QH LH KH_tan KH_int TFP
QH LH KH_tan KH_int TFP QH LH KH_tan KH_int TFP
1999-07, EU 1999-07, US
2012-15, EU 2012-15, US
Graphs by xperiod and group_Country
(EU&US, Non-farm Business, per hour)
Growth accounting
Note: EU ICT deflators harmonized to U.S. deflators.
Source: INTAN-Invest c 2018. National accounts. Labor force surveys.
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14. But there may be fewer spillovers than previously
AT
DE
DK
ES
FI
FR
IT
NL
SE
UK
US
AT
DE
DK
ES
FI
FR
IT
NL
SE
UK
US
-.010.01.02.03
Multifactorproductivitygrowth
0 .01 .02 .03 .04 .05
Intangible capital services growth
Note: non-farm business.
(1999-2007 open diamonds; 2012-2015 closed circles)
MFP and intangible capital services growth
Source: INTAN-Invest c 2018. National accounts. Labor force surveys.
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15. Summing up
• The sources of growth analysis shows that intangible capital
deepening is an important driver of growth in the US and in the
EU14 countries
• These results are sensitive to the extension of the national
account asset boundary to the CHS list of intangibles.
• Once all intangible assets are capitalized capital deepening
remains a relevant driver of growth but with a more prominent
contribution of intangible capital.
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16. Future challenges
• Some forms of intangible assets are pretty exotic as they have no
physical form, making valuation, depreciation, etc. all difficult
thus national accounts integration goes slowly
• Intangibles can be marketized but in-house production is a large
share of total production, making valuation even more
complicated.
• Crucial evaluate international flows of intangibles but very
challenging to measure.
• Integrating the impact of intangibles on growth is tricky:
• Spillovers and complementarities are difficult to measure and hard to convey.
• Causality is probably a bigger issue with intangibles than with tangibles
• If intangibles is the main story, the focus is long-term, not
short-term requiring bigger policy commitments starting from the
measurement effort.
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