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Intangible Capital and Measured Productivity
Because ?rms invest heavily in R&D, software, brands, and other intangible assets?at a rate close to that of tangible assets?changes in measured GDP, which does not include all intangible investments, understate the actual changes in total output. If changes in the labor input are more precisely measured, then it is possible to observe little change in measured total factor productivity (TFP) coincidentally with large changes in hours and investment. This mismeasurement leaves business cycle modelers with large and unexplained labor wedges accounting for most of the ?uctuations in aggregate ...