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    Three essays on the size and contribution of intangible investment to the overall capital stock

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    Belhocine_Nazim_200806_PhD.pdf (995.9Kb)
    Date
    2008-06-30
    Author
    Belhocine, Nazim
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    Abstract
    This thesis aims to contribute to a better understanding of the overall magnitude

    of intangible investment and the impact of this intangible investment on the behavior

    of the capital stock and on the value of capital goods.

    I begin by constructing a data set to document firms’ expenditures on an identi-

    fiable list of intangible items in Canada. I then examine the implications of treating

    intangible spending as the acquisition of final (investment) goods on estimates of GDP

    growth for Canada. I find that investment in intangible capital by 2002 is almost as

    large as the investment in physical capital. Furthermore, the growth in GDP and

    labor productivity may be underestimated by as much as 0.1 percentage point per

    year during this same period.

    I proceed by measuring the size of the stock of the intangible capital in Canada

    using newly released data on the market value of all securities in the economy. The

    approach taken relies on a quantitative application of the q-theory of investment to

    generate the quantity of capital owned by firms. I find that the intangible capital

    stock accounted for approximately 30% of overall capital since 1994. Of this, the

    R&D reported by national accounts makes up only 23%. These results imply that

    official Canadian statistics failed to account for 26% of the value of the capital stock

    in their 2005 quarterly data collection.

    Finally, I extend the q-theory of investment to model explicitly the decision of

    firms to invest in intangibles. I then use the model to measure the contribution of

    intangible goods to the overall capital stock in the U.S. The model departs from

    the one mentioned earlier in that it highlights the embodiment of intangible goods

    in tangibles and the role of relative price movements in the measurement of the

    contribution of each type of investment to the overall capital stock. I find that the

    growth in the overall capital stock from the late-80s until 2000 was driven mainly by

    an increase in the contribution of intangibles. However, the contribution of intangibles

    fell consistently after 2000. These results underscore the importance of accounting

    for the movements in the price of intangibles rather than focusing only on their rising

    share in overall investment.
    URI for this record
    http://hdl.handle.net/1974/1266
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    • Department of Economics Graduate Theses
    • Queen's Graduate Theses and Dissertations
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