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“The rise of market power and the macroeconomic Implications”

In sum, the results shown in Table 4 strongly suggest that intangibles matter not just for national income and wealth accounting, but for growth accounting as well. Indeed, our estimates, rough as they may be, imply that the traditional practice of expensing intangibles results in a seriously distorted picture of the sources of growth. Table 5 continues the SOG of Table 4 by disaggregating line 6 of that table’s lower panel into the separate components shown in Table 1. It is probably not surprising that computerized information (software) is an important factor driving the growth of the total intangible variable in Table 4, but it is perhaps more surprising that firm-specific resources are found to be of equal importance. The rather small role of scientific R&D also is surprising in light of the attention that R&D has been given in the literature on innovation. Scientific R&D accounts for only a modest portion of total intangible capital deepening and is markedly less important than investment in software.29 It is also worth noting that the nontraditional types of intangibles highlighted in this paper—non-scientific R&D, brand equity, and firm-specific resources—together account for nearly 60 percent of total intangible capital deepening since 1995. Because software is already capitalized in the NIPAs, and scientific R&D will probably be sometime over the next decade, our results suggest that growth accountants should not lose sight of these other forms of intangible capital. This paper highlights the importance of intangibles as a source of economic growth.