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Title: Intangible Capital and the Origin of Modern Structural Change

Citation Type: Miscellaneous

Publication Year: 2009

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Abstract: This paper presents theory and evidence about the ongoing sectoral structural change in theUS economy based on intangible capital accumulation.The sectoral composition of US economy has shifted dramatically in the recent decades.I argue that a ready explanation for this structural transformation lies in the dierence ofintangible capital intensity across sectors. The two-sector model of the paper shows thatas the productivity of intangible capital investment increases, labor is shifted from directgoods production tasks to creating sector-speci?c intangible capital. In the process, thereal output and employment shares increase for the intangible-capital intensive sector. Themodel simulation generates realistic scale of sectoral composition change that fully matchesthe magnitude of increasing output share for the intangible capital intensive sector in theUS, and can account for 65% of the sector?s employment share increase.The empirical exercise of the paper ?nds a positive and signi?cant association betweenintangible capital investment intensity and ?rms? future output and employment growth.The correlation is higher for ?rms in the growing sector, which is more intangible capitalintensive. At the industry level, controlling for industry human capital intensity, physicalcapital intensity and IT investment level, intangible capital intensity is positively correlatedwith future industry real output and employment share growth. These ?ndings are consistentwith the implications of the model.The paper also shows that 86% of the rise of service sector output can be accounted forby high intangible capital industries.

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Authors: Che, Natasha Xingyuan

Publisher: Georgetown University

Data Collections: IPUMS USA

Topics: Labor Force and Occupational Structure, Other

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