Innovation, Knowledge Spending and Productivity Growth in the UK Jonathan Haskel and Annarosa Pesole...
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Transcript of Innovation, Knowledge Spending and Productivity Growth in the UK Jonathan Haskel and Annarosa Pesole...
Innovation, Knowledge Spending and Productivity Growth in the
UK
Jonathan Haskel and Annarosa Pesole Imperial College Business School, Imperial College London
Project funded by the European Commission under the Seventh Framework Programme
Grant No 217512www.coinvest.org
Broad questions
Better understanding of the “new” or “knowledge” economy: data, facts, policy
Popular discussion:“Old economy”: tangible capital
traditional machines, production lines etc
“New Economy”: intangible captialSoftware, hardware, ICTMove to knowledge-intensive activitiesRise of the service sector
Innovation as a key economic driver
Sources of growth with intangibles
/ : ln ln ln ln
: ln
TAN
TANL K
Growth a c V s L s K TFP
Innovation index II TFP
/ : ln ln ln ln ln
: ln ln
TAN INTAN
INTAN
INTAN TAN INTAN INTANL K K
INTAN INTAN
K
Growth a c V s L s K s K TFP
Innovation index II s K TFP
Excluding intangibles:
Including intangibles:
Innovation = contribution to growth of freely available knowledge plus the contribution of knowledge/intangible capital
Lessons: a. productivity growth changes
b. TFPG changes
c. “innovation” changes
Types of intangibles, details
A. Computerised information
Method and data sources
Computerised information
Computer softwarePurchased: via surveys. Own account: labour force data on software professionals. Source: National Accounts
Computerised databases Included
B. Scientific and creative propertyInnovative property
Scientific R&DCurrent expenditure on R&D from BERD. R&D in computer industry subtracted
Mineral explorationMainly R&D in mining and spending on mineral exploration. National Accounts
Copyright and license costsSpending on creation of originals e.g. TV, movies, books. National Accounts
Other product development, design and research
New product development costs in the financial industry
Occupation-based estimates
New architectural and engineering designs
Sales of architecture and design industry SIC 742, ABI data. Own account using labour costs data.
R&D in social science and humanitiesNo broad statistical information. Estimated as twice industry revenues of social science and humanities R&D industry
C. Economic competenciesBrand equity
Advertising expenditureTotal spending on advertising as reported by Advertising Association, less expenditure on classified ads
Market researchTwice revenues of the market and consumer research industry as reported in ABI.
Firm-specific human capital
NESS05, survey of employer provided training. Includes: A) Direct firm expenses (in-house trainers, outside trainers, tuition reimbursement, and outside training funds) B) Wage and salary costs of employee time in training.
Organizational structure
PurchasedData on revenues of managment consulting industry from Management Consulting Assocation.
Own accountNo broad statistical information. Estimated as 20% of value of executive time using ASHE data on wages in executive occupations, excluding software occupations.
0 .05 .1 .15 .2 .25share of investment
Training
Software
Organisational capital
Mkt research & Adv
Min&Cop
AED & FinProd
R&D
20082000
20082000
20082000
20082000
20082000
20082000
20082000
(% of total)Intangible investment
Intangible and tangible investment (£bn)Year 1990 1995 2000 2008
All tangibles 67 62 87
Intangible categorySoftware 6 10 16 22
R&D 8 9 12 16
Design 13 13 15 23
Minerals & Copyrights 3 3 2 4
Branding 5 7 12 15
Training 14 17 24 30
Organisational 9 12 17 31
All intangibles 57 70 98 141
Trends in intangible spend
Tot
Sof
R&D
InnProp
EC
.05
.1.1
5
1980 1990 2000 2010year
ecomp+innov+soft ecomp+innovecomp+innov-R&D ecomp
Intangible investment (% of MGVA)
Computers tangible contribution halved wrt prev estimates due to revision on hardware capital stock
Takeaways:
1. LPG changes, particularly in 1990s
2. TFPG reduced
Lab Prod Growth
Contrib. of Lab. Quality
Contrib. of Computers per hour
Contrib. of Other Tang K, per hour
Contrib. of Intang K per hour
TFP Growth
1 2 3 4 5 6 7
DlnV/H sDln(L/H)sDln(K/L) cmp
sDln(K/L) othtan
sDln(K/L) intan DlnTFP
Memo: sLAB
Without intan1990-95 2.88% 0.20% 0.20% 0.86% 1.63% 0.661995-00 3.35% 0.29% 0.45% 0.33% 2.28% 0.642000-08 2.34% 0.19% 0.24% 0.56% 1.35% 0.66
With intang1990-95 2.92% 0.17% 0.17% 0.74% 0.68% 1.15% 0.571995-00 3.60% 0.25% 0.38% 0.26% 0.67% 2.03% 0.552000-08 2.31% 0.16% 0.20% 0.42% 0.48% 1.04% 0.57
More intangible categories1 2 3 4 5 6 7 8 9
DlnV/H sDln(L/H)sDln(K/L) cmp
sDln(K/L) othtan
sDln(K/L) software
sDln(K/L) innov prop (less R&D)
sDln(K/L) R&D
sDln(K/L) econ comp DlnTFP
1990-95 2.92% 0.17% 0.17% 0.74% 0.18% 0.10% 0.06% 0.34% 1.15%1995-00 3.60% 0.25% 0.38% 0.26% 0.23% -0.02% 0.04% 0.42% 2.03%2000-08 2.31% 0.16% 0.20% 0.42% 0.10% 0.09% 0.04% 0.26% 1.04%
Detail on intangible categories…software, design, training, organisation important
5 6 7 8 9 10 11 12
sDln(K/L) software
sDln(K/L) min & cop
sDln(K/L) design
sDln(K/L) r&d
sDln(K/L) adv & mr
sDln(K/L) training
sDln(K/L) org DlnTFP
1990-95 0.18% 0.02% 0.08% 0.06% 0.07% 0.13% 0.15% 1.15%1995-00 0.23% 0.00% -0.02% 0.04% 0.13% 0.16% 0.13% 2.03%2000-08 0.10% 0.00% 0.08% 0.05% 0.02% 0.08% 0.15% 1.04%
Results: %s of ALPG (1)Without intangibles, %, 90-95, 95-00 & 00-08
6.9%
6.9%
29.9%
56.6%
100.0%
8.7%
13.4%
9.9%
68.1%
100.0%
8.1%
10.3%
23.9%
57.7%
100.0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
sDln(L/H) sDln(K/L)cmp
sDln(K/L)othtan
DlnTFP DlnV/H sDln(L/H) sDln(K/L)cmp
sDln(K/L)othtan
DlnTFP DlnV/H sDln(L/H) sDln(K/L)cmp
sDln(K/L)othtan
DlnTFP DlnV/H
Results: %s of ALPG (2)With intangibles, %, 90-95, 95-00 & 00-08
5.8%5.8%
25.3%
23.3%
39.4%
100.0%
6.9%
10.6%
7.2%
18.6%
56.4%
100.0%
6.9%
8.7%
18.2%
20.8%
45.0%
100.0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
sDln(L/H) sDln(K/L)cmp
sDln(K/L)othtan
sDln(K/L)intan
DlnTFP DlnV/H sDln(L/H) sDln(K/L)cmp
sDln(K/L)othtan
sDln(K/L)intan
DlnTFP DlnV/H sDln(L/H) sDln(K/L)cmp
sDln(K/L)othtan
sDln(K/L)intan
DlnTFP DlnV/H
Robustness: it’s not all just software…..
1 2 3 4 5 6
DlnV/H sDln(L/H)sDln(K/L) cmp
sDln(K/L) othtan
sDln(K/L) intan DlnTFP
With intang
1990-95 2.92% 0.17% 0.17% 0.74% 0.68% 1.15%
1995-00 3.60% 0.25% 0.38% 0.26% 0.67% 2.03%
2000-08 2.31% 0.16% 0.20% 0.42% 0.48% 1.04%
only software
1990-95 2.97% 0.20% 0.19% 0.86% 0.20% 1.52%
1995-00 3.44% 0.28% 0.43% 0.33% 0.27% 2.12%
2000-08 2.37% 0.18% 0.24% 0.54% 0.12% 1.30%
software and rd
1990-95 2.93% 0.19% 0.19% 0.84% 0.27% 1.44%
1995-00 3.45% 0.28% 0.43% 0.32% 0.30% 2.12%
2000-08 2.34% 0.18% 0.23% 0.52% 0.15% 1.26%
2) Including i) just software ii) just software and R&D
Robustness: depreciation not key…
1 2 3 4 5 6
DlnV/H sDln(L/H)sDln(K/L) cmp
sDln(K/L) othtan
sDln(K/L) intan DlnTFP
With intang
1990-95 2.92% 0.17% 0.17% 0.74% 0.68% 1.15%
1995-00 3.60% 0.25% 0.38% 0.26% 0.67% 2.03%
2000-08 2.31% 0.16% 0.20% 0.42% 0.48% 1.04%
halve dep rates
1990-95 2.92% 0.17% 0.17% 0.78% 0.83% 0.97%
1995-00 3.60% 0.25% 0.38% 0.26% 0.69% 2.02%
2000-08 2.31% 0.16% 0.20% 0.41% 0.62% 0.92%
double dep rates
1990-95 2.91% 0.17% 0.17% 0.72% 0.56% 1.29%
1995-00 3.60% 0.25% 0.38% 0.27% 0.71% 1.98%
2000-08 2.31% 0.16% 0.21% 0.44% 0.38% 1.12%
3) Altering Depreciation rates