Intangible Capital Worldwide: Determinants and Properties

• Activity Number: 387
• Type: Topic Contributed
• Date/Time: Tuesday, August 5, 2014 : 2:00 PM to 3:50 PM
• Sponsor: Business and Economic Statistics Section
• Author(s): Carol Corrado*+ and Janet X. Hao
• Companies: The Conference Board and The Conference Board
• Keywords: economic growth and development ; steady-state convergence ; global intangible investment ; global ICT investment ; global R&D investment

Abstract

This paper studies the determinants and time-series properties of selected components of intangible investment on a global basis. We propose a simple model and econometric approach that helps to answer the question: Does the rate of intangible investment drive economic development or does economic development drive the rate of intangible investment? Economic theory suggests that investment rates are constant in steady state growth (and thus stationary and not driven by the level of economic activity per se). We find convergence to steady state for most of the investment series we examine although a subset exhibit a long-run relationship (co-integration) with the level of economic development. R&D is not among the latter. The time path of a country's research intensity shows convergence, i.e., it is stationary, dependent on its distance from steady state and unrelated to its level of economic development.