The Embodiment of Intangible Investment Goods: a Q-Theory Approach
IMF Working Papers, April 1, 2010
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- The Embodiment of Intangible Investment Goods: a Q-Theory Approach
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Bibliographic details
- Authors: Nazim Belhocine
- Published: April 1, 2010
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451982626.001
Abstract and scope
- Extends the q-theory of investment to model explicitly the decision of firms to invest in intangibles.
- Measures the contribution of intangible goods to the overall capital stock in the U.S.
- Highlights the embodiment of intangible goods in tangibles and the role of relative price movements in measuring each type of investment's contribution to the overall capital stock.
Key findings
- The downward trend in the aggregate investment deflator series reported by national accounts is found to have a significant downward bias in the 90s.
- Growth in the overall capital stock from the late-80s until 2000 was driven mainly by an increase in the contribution of intangibles.
- The contribution of intangibles fell consistently after 2000.
- Results emphasize the importance of accounting for movements in the price of intangibles rather than focusing only on their rising share in overall investment.
Methodology and theoretical contribution
- Adapts q-theory to explicitly incorporate firms' decisions to invest in intangible assets.
- Models the embodiment of intangible goods within tangible capital.
- Incorporates relative price movements between intangible and tangible investment goods into measurement of capital stock contributions.
Policy and measurement implications
- National accounts and investment deflators that do not adequately account for relative price movements of intangibles may introduce significant bias (notably a downward bias in the 90s).
- Accurate assessment of capital stock growth requires tracking prices of intangible investment goods, not solely their shares in total investment.