Intangible Investment and Economic Growth in Japan

Report
Intangible Investment and Economic
Growth in Japan
Presented at the 3rd World KLEMS Conference at Tokyo
on May 19th
Tsutomu Miyagawa (Gakushuin University and RIETI)
Konomi Tonogi (Kanagawa University)
Shoichi Hisa (Kanagawa University)
IT industries and Intangibles in Japan
• Jorgenson, Ho, and Stiroh (2005), Inklaar,
O’Mahony and Timmer (2005), Fukao, et al.
(2012): IT industries are key sectors of economic
growth in advanced countries.
• In Japan, the value added growth and TFP
growth in the IT industries have surpassed those
in non-IT industries.
• The growth strategies in Japan have strengthened
the utilization in IT.
Growth in IT Industries
Growth in Non-IT Indutries
8.00%
3.00%
2.50%
7.00%
2.00%
6.00%
1.50%
5.00%
1.00%
4.00%
0.50%
0.00%
3.00%
1980-90
1990-2000
2000-10
-0.50%
2.00%
-1.00%
1.00%
-1.50%
0.00%
1980-90
Growth in value added
TFP growth
1990-2000
2000-10
Labor productivity grwoth
-2.00%
Growth in value added
TFP growth
Labor productivity grwoth
IT industries and Intangibles in Japan contd.
• The Economic Report of the President in the US in 2007
emphasized complementarities between IT investment and
intangible investment.
• Corrado, Hulten and Sichel (2009) (hereafter referred to as
CHS) measured aggregate intangible investment in the US.
• Following their approach, we measure the aggregate
intangible investment in advanced countries.
• However, to examine the complementarities between IT
investment and intangibles, we need to measure intangible
investment by industry. →Chun et al. (2012), Miyagawa
and Hisa (2013), Niebel et al. (2013), Crass et al. (2014).
The Measurement of Intangible Investment
by Industry in Japan
• Following the CHS approach, we extended the
intangible investment series developed by
Chun et al. (2012) and Miyagawa and Hisa
(2013) to 2010 by using the JIP database and
other primary statistics.
• The current version of intangible investment
data can be found at the following website:
http://www.rieti.go.jp/en/database/JIP2011/ind
ex.html#04-6.
The Measurement of Intangible Investment
by Industry in Japan contd.
• Revised points of 2014 version of Intangible
Investment data.
(1) As JSNA started to publish data on own account
software investment as well as custom and
packaged software investment, we use the JSNA
data to construct computerized information as
much as we can.
(2) Copyright and license costs →Entertainment and
artistic originals.
The Measurement of Intangible Investment
by Industry in Japan contd.
• The amount of intangible investment in the
2000s is about 40 trillions of JPY.
• It has declined since the Leaman Shock. In
particular, investment in economic
competencies has declined since 2000, due to
the harsh restructuring that occurred after the
financial crisis in Japan.
• Intangible investment in the IT industries
accounts for over 60% of total intangible
investment.
Estimated Intangible Investment in Japan
1991-2000
2001-2010
CI
IP
EC
Total
CI
IP
EC
Total
Total
5,332
17,094
10,375
32,800
9,723
19,425
9,856
39,004
Market Economy
1,504
16,753
9,038
27,296
2,955
18,786
8,563
30,304
*CI: computerized information, IP: innovative property, EC: economic competencies
Manufacturing
3,270
12,142
2,620
18,032
5,671
12,549
2,433
20,653
Service
3,270
4,561
6,236
14,068
5,671
6,209
5,959
17,838
IT industries
3,511
11,954
5,446
20,911
6,346
14,072
5,399
25,817
(billions of JPY)
Non-IT indusstries
1,274
4,799
3,592
9,665
2,299
4,714
3,164
10,177
Comparison of Intangible Investment between
Japan and Korea
• The ratio of intangible investment to GVA in
Japan is greater than Korea.
• However, the gap between Japan and Korea
has contracted since 1990.
• In some service industries, the intangible
investment/GVA ratios in Korea have
surpassed those in Japan. In particular,
investment in computerized information in
service industries is greater than that in Japan.
Intangible Investment/GVA Ratio in Japan and
Korea
Korea
Japan
1981-1990 1991-2000 2001-2010 1981-2010 1981-1990 1991-2000 2001-2008 1981-2008
Total economy
CI
IP
EC
Total
0.67%
2.69%
1.84%
5.20%
1.03%
3.29%
1.99%
6.31%
1.87%
3.74%
1.90%
7.50%
1.25%
3.30%
1.92%
6.47%
0.41%
1.51%
1.67%
3.60%
*CI: computerized information, IP: innovative property, EC: economic competencies
** The Korean data is taken from Chun and Nadiri (2013)
1.18%
2.45%
2.40%
6.03%
1.85%
3.28%
2.25%
7.38%
1.10%
2.35%
1.35%
5.55%
Intangible Investment/GVA Ratio by Industry in Japan and Korea
Industry name
Agriculture, forestry and fishing
Mining and quarrying
Food, beverages and tobacco
Textiles and leather
Wood, paper, and printing
Petroleum, coal and chemicals
Non-metallic mineral products except petroleum and coal
Metal, Fabricated metal products
Machinery equipment
Electrical and electronic equipment
Precision instruments
Transport equipment
Furniture and other manufacturing industries
Electricity, gas and water supply
Construction
Wholesale and retail trade
Restaurants and hotels
Transport and storage
Financial intermediation
Real estate and renting
Information and communication
Business services
Public administration and defense
Education
Health and social work
Culture and entertainment services
Other service activities
1980
Japan
1.67%
2.25%
3.05%
3.83%
3.20%
10.57%
4.90%
4.19%
6.17%
14.83%
9.93%
9.16%
7.17%
1.71%
2.03%
3.00%
1.84%
1.91%
4.01%
2.01%
4.76%
3.71%
3.04%
1.48%
1.74%
1.41%
2.01%
Korea
0.10%
1.28%
4.54%
1.73%
4.73%
2.97%
1.13%
1.61%
3.97%
4.23%
1.39%
4.48%
2.49%
1.64%
1.31%
1.40%
4.87%
1.31%
4.12%
2.16%
4.02%
6.41%
3.34%
2.76%
1.84%
2.29%
2.37%
* Intnagible investment/GVA ratios in Korea in 2008 are expressed in the last column.
** Intangible investment in Korea is measured in Chun, et. al. (2012)
1990
Japan
Korea
1.68%
0.20%
4.52%
2.86%
5.81%
9.95%
5.89%
4.12%
4.90%
3.36%
14.66% 10.71%
7.55%
3.33%
6.01%
2.73%
8.79%
8.71%
18.53% 17.19%
17.79% 7.28%
14.19% 8.89%
10.58% 5.13%
3.76%
1.88%
2.96%
3.97%
4.96%
1.92%
4.73%
3.62%
2.08%
1.52%
4.99%
6.01%
2.82%
3.88%
13.85% 5.00%
6.27%
8.53%
4.11%
3.65%
1.73%
3.50%
3.28%
1.89%
3.04%
2.99%
3.10%
2.06%
2000
Japan
Korea
2.52%
0.24%
7.00%
4.41%
6.06%
9.56%
8.73%
3.93%
6.70%
3.70%
17.50% 8.88%
9.02%
2.25%
7.20%
2.68%
12.86% 11.80%
22.93% 13.28%
27.64% 9.24%
16.62% 12.16%
21.55% 6.13%
5.06%
5.00%
3.67%
3.02%
5.30%
4.07%
4.10%
1.51%
2.56%
3.20%
8.36%
8.12%
4.40%
4.99%
15.63% 11.06%
7.81%
7.16%
5.32%
4.72%
1.83%
4.41%
3.25%
2.22%
5.04%
4.56%
3.79%
4.18%
2010
Japan
Korea
3.07%
0.36%
8.65%
5.66%
6.60% 15.00%
24.19% 5.11%
9.54%
4.94%
18.29% 11.83%
11.15% 3.42%
6.92%
4.30%
15.68% 12.60%
32.02% 25.87%
32.10% 19.47%
17.44% 11.51%
16.94% 5.16%
5.99% 13.22%
3.13%
3.12%
4.70%
3.54%
4.08%
1.29%
4.23%
2.57%
12.75% 9.15%
5.19%
2.27%
16.56% 15.36%
10.27% 6.11%
6.33%
3.61%
1.57%
4.19%
1.42%
2.28%
2.88%
7.86%
3.23%
5.44%
Capital Stock in Intangibles in Japan
• When we construct capital stock in intangibles
using the perpetual inventory method, we use two
types of depreciation rates; the first type follows
Corrado et al. (2013) and the second type is
measured from our own survey on intangibles.
• As Japanese firms expect stock in innovative
property to deteriorate rapidly, depreciation rates
of assets in innovative property are larger than
those measured by Corrado et al. (2013).
Depreciation rates for intangible assets
(%)
Survey on intangibles
in Japan
Category
Computerized information
Scientific R&D
Mineral exploitation
Entertainment and artistic originals
Other intangbles in innovative property
Brand equity
Firm-specific human capital
Organizationla reform
Corrado et al. (2013)
31.5
15
7.5
20
20
55
40
40
32
26
7.5
48
39
66
32
47
Capital Stock in Intangibles in Japan contd.
• The amount of intangible assets in Japan is 167 trillions of
JPY, when we use the depreciation rates developed by
Corrado et al. (2013).
• However, the amount of intangible assets using alternative
depreciation rates is 124 trillion of JPY in 2010 due to the
decrease in assets in innovative property.
• In both cases, the growth rate in capital stock in
intangibles has slowed down since 1990. In particular, the
growth rate in economic competencies turned negative in
the 2000s.
• In some service industries, the growth rates in intangibles
also turned negative in the 2000s.
Capital Stock in Intangible Assets in Japan (Corrado et,al.’s case)
Corrado, e t,al.
2010
billions of
JPY
Marke t e conomy
CI
IP
EC
Total
Manufacturing
CI
IP
EC
Total
Se rvice
CI
IP
EC
Total
IT indus trie s
CI
IP
EC
Total
Non-IT indus trie s
CI
IP
EC
Total
1985-1990
annual
growth rate
(%)
1990-2000
annual
growth rate
(%)
2000-2010
annual
growth rate
(%)
29,353
120,981
16,964
167,297
14.36%
12.73%
5.65%
11.31%
6.05%
4.15%
1.50%
3.91%
5.23%
1.75%
-2.00%
1.77%
10,082
85,649
4,844
100,574
11.57%
12.06%
4.19%
11.18%
6.71%
3.73%
0.46%
3.63%
6.12%
1.16%
-1.55%
1.38%
19,218
35,067
11,644
65,929
15.70%
15.51%
6.65%
11.82%
5.77%
5.61%
1.98%
4.45%
4.81%
3.47%
-2.27%
2.45%
21,338
89,306
10,189
120,833
14.46%
13.66%
5.69%
12.18%
5.74%
4.47%
1.82%
4.23%
5.05%
2.14%
-2.07%
2.11%
8,015
31,675
6,775
46,465
14.16%
10.80%
5.59%
9.62%
7.16%
3.41%
1.03%
3.22%
5.73%
0.74%
-1.88%
0.95%
*CI: computerized information, IP: innovative property, EC: economic competencies
Capital Stock in Intangible Assets in Japan (based on the Japanese survey)
Surve y in Japan
2010
billions of
JPY
Marke t e conomy
CI
IP
EC
Total
Manufacturing
CI
IP
EC
Total
Se rvice
CI
IP
EC
Total
IT indus trie s
CI
IP
EC
Total
Non-IT indus trie s
CI
IP
EC
Total
1985-1990
annual
growth rate
(%)
1990-2000
annual
growth rate
(%)
2000-2010
annual
growth rate
(%)
28,660
76,896
18,595
124,210
14.23%
10.58%
5.60%
9.50%
6.04%
3.66%
1.61%
3.51%
5.19%
2.73%
-1.78%
2.35%
9,844
36,588
5,382
51,814
11.45%
8.12%
3.98%
7.63%
6.70%
1.68%
0.64%
2.00%
6.09%
1.06%
-1.39%
1.48%
18,765
40,221
12,736
71,781
15.57%
17.65%
6.68%
12.17%
5.76%
7.12%
2.07%
5.06%
4.77%
4.64%
-2.01%
3.07%
20,831
61,462
11,342
93,694
14.32%
11.88%
5.64%
10.50%
5.74%
4.39%
1.91%
4.07%
5.00%
3.30%
-1.80%
2.81%
7,829
15,435
7,253
30,516
14.07%
7.82%
5.54%
7.52%
7.12%
1.70%
1.16%
2.21%
5.71%
0.77%
-1.73%
1.05%
*CI: computerized information, IP: innovative property, EC: economic competencies
Growth Accounting with Intangibles
• When we conduct growth accounting with
intangibles, the role of intangible assets on
economic growth has increased since 1995.
• In particular, accumulation in intangibles plays a
key role in economic growth in the service sector
and the IT industries.
• We find that the effects of intangibles on economic
growth are concealed in capital accumulation and
TFP growth in traditional growth accounting.
Growth Accounting with Intangibles and a
Traditional Growth Accounting
1985-95
Marke t e conomy
GDP growth
Labor input
Tang ible capital input
Intang ible capital input
TFP g rowth
Manufacturing
GDP growth
Labor input
Tang ible capital input
Intang ible capital input
TFP g rowth
Se rv ice
GDP growth
Labor input
Tang ible capital input
Intang ible capital input
TFP g rowth
IT industries
GDP growth
Labor input
Tang ible capital input
Intang ible capital input
TFP g rowth
Non-IT industrie s
GDP growth
Labor input
Tang ible capital input
Intang ible capital input
TFP g rowth
1995-2010
3.04%
0.39%
1.54%
0.48%
0.62%
0.55%
-0.38%
0.39%
0.21%
0.33%
2.51%
-0.31%
1.39%
0.86%
0.57%
1.45%
-0.82%
0.30%
0.33%
1.65%
3.57%
0.82%
1.63%
0.33%
0.79%
0.19%
-0.19%
0.43%
0.18%
-0.23%
5.00%
0.33%
1.54%
0.66%
2.47%
1.38%
-0.09%
0.51%
0.34%
0.63%
1.03%
0.45%
1.52%
0.30%
-1.24%
-0.47%
-0.72%
0.23%
0.08%
-0.06%
Market economy
GDP growth
Labor input
Capital input
TFP growth
Manufacturing
GDP growth
Labor input
Capital input
TFP growth
Service
GDP growth
Labor input
Capital input
TFP growth
IT industries
GDP growth
Labor input
Capital input
TFP growth
Non-IT industries
GDP growth
Labor input
Capital input
TFP growth
1985-90
1990-95
3.13%
0.44%
1.64%
1.05%
0.43%
-0.39%
0.44%
0.38%
2.80%
-0.28%
1.56%
1.52%
1.30%
-0.94%
0.45%
1.80%
3.57%
0.86%
1.70%
1.00%
0.12%
-0.18%
0.45%
-0.16%
5.29%
0.38%
1.65%
3.26%
1.27%
-0.09%
0.63%
0.72%
1.01%
0.49%
1.63%
-1.12%
-0.55%
-0.73%
0.24%
-0.06%
Growth Accounting with Intangibles contd.
• International comparison of growth accounting
shows that the contribution of intangibles to
labor productivity growth in Japan is the
lowest in advanced countries.
• The growth strategy in Abenomics published
last year emphasized that the government
supports investment in tangible assets
aggressively.
• However, the Japanese government should
support intangible as well as tangible
investment to restore the Japanese economy
through change in industrial structure.
International Comparison of Growth
Accounting
(%)
Labor
productivity
growth
Capital
deepening
Japan
Austria
Belgium
Chech Republic
Denmark
Finland
France
Germany
Ireland
Italy
Netherlands
Slovenia
Spain
Sweden
UK
US
2.1
2.4
1.8
4.2
1.4
3.8
1.9
1.7
3.8
0.6
2.3
5.3
0.8
3.7
2.9
2.7
0.9
0.8
0.7
2.4
1.2
0.9
1.0
1.0
1.4
0.7
0.9
1.7
1.0
1.9
1.5
1.7
Labor
TFP growth
composition
Tangible
assets
0.7
0.3
0.2
1.9
0.7
0.2
0.4
0.7
0.8
0.5
0.4
1.2
0.7
1.1
0.8
0.8
Intangible
assets
0,2
0.5
0.5
0.5
0.5
0.7
0.6
0.3
0.6
0.2
0.5
0.5
0.3
0.8
0.7
0.9
0.8
0.2
0.1
0.3
0.2
0.2
0.4
0.0
0.1
0.2
0.7
0.7
0.5
0.3
0.4
0.2
0.5
1.4
0.9
1.5
-0.1
2.6
0.4
0.7
2.2
-0.4
2.8
2.8
-0.6
1.4
1.1
0.8
* In Japan, labor productivity growth from 1995 to 2010 is decomposed and the decomposition of
labor productivity grwoth conducted by Corrad et, al. (2013).
Thank you for your attention!

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