Intangible Capital and Measured Productivity

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Intangible Capital and
Measured Productivity

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In a recent Staff Report published by the Federal Reserve Bank of Minneapolis, Ellen McGrattan investigates the impact of intangible assets (such as R&D, software, and brands) on aggregate and industry-level U.S. data.

The report highlights that firms invest almost as heavily in intangible assets as they do in tangible assets, like machinery, facilities, and other physical capital. Measured GDP includes tangible assets, but not all intangible assets, so actual changes in total output can leave out a significant amount of investment.

In this report, McGrattan provides a new benchmark model for business cycle research and finds that accurate, comprehensive measurement of all assets affects aggregate and industry-level U.S. data.

Ellen McGrattan is the director of the Heller-Hurwicz Economics Institute and a Professor in the Department of Economics at the University of Minnesota
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