output as given and then seek to uncover the determinants of existing measures of labor productivity or multifactor productivity. Corrado noted that, when she was working at the Federal Reserve during the late 1990s and early 2000s, it was common to associate information technology (IT) spending with underlying productivity change. This led her to wonder about the extent to which innovation was more than this, and to think about related effects from firms coinvesting in other inputs (including workers) along with IT.2 The CHS work, as well as that by other researchers working in this area, sought to determine whether a broader set of innovation inputs could be captured and measured.

Implementing an expanded view of investment required CHS to develop a framework for measuring what is, in essence, the knowledge capital of the firm. This framework—which included three broad categories and then expanded to identify nine broad asset types (and many subcategories)—was grounded in an earlier literature that included important contributions by Leonard Nakamura and Baruch Lev.

Corrado presented results, updated through 2007, that emerged from the researchers’ analytic process aimed at estimating a macroeconomic series for intangible investment. Figure 3-1 shows investment shares of output for business investment in both tangible and intangible assets. The trajectory of estimated business investments in intangible assets (the triangle plots) has a decidedly upward trend over the nearly 60-year period, whereas that for tangible investments (the diamond plots) includes extended flat and downward portions. U.S. intangible investment was more than $1 trillion in the late 1990s and, after falling off during the recession, returned to that level by 2005. In the first seven years of this decade—2001 to 2007—intangible business investment was 45 percent larger than tangible investment.

For estimating GDP, the Bureau of Economic Analysis (BEA) already capitalizes an important intangible, software, along with some other smaller items. However, nonfarm business output would have been 12 percent higher if the new intangible categories were included. And, despite the flattening of intangible investment relative to output in the early parts of this decade, if BEA were to capitalize the remaining CHS intangibles, saving rates and capital accumulation would have been higher; for example, the value of capital would have been more than $3 trillion higher in 2003; and the updated estimates show the value of intangible assets at more than $5 trillion in 2006, nearly $4 trillion higher than those currently capitalized in the national accounts.

In new work, Corrado and Hulten have built a system for producing macroeconomic estimates of output and productivity including intangibles from 1959 to 2007 (the CHS work covered the period from 1973 to 2003). Corrado referred to a forthcoming paper for technical explanations, stating that the idea was to design


Corrado also pointed out the historical roots of these ideas dating back to “Schumpeterian entrepreneurs” and “Nelson-Phelps managers,” among others.

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