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INTANGIBLE CAPITAL AND INTERNATIONAL INCOME DIFFERENCES

Published online by Cambridge University Press:  23 November 2011

Aamir Rafique Hashmi
Aamir Rafique Hashmi*
Affiliation:
National University of Singapore
*
Address correspondence to: Aamir Rafique Hashmi, Department of Economics, National University of Singapore, 1 Arts Link, AS2/05-08, Singapore117570; e-mail: aamir@nus.edu.sg.
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Abstract

I add intangible capital to a variant of the neoclassical growth model that already features physical and human capital, and study the implications for international income differences. I calibrate the parameters associated with intangible capital by using new estimates of investment in intangibles by Corrado et al. [Review of Income and Wealth 55, 661–685 (2009)] and depreciation rates by Corrado and Hulten [American Economic Review 100, 99–104 (2010)]. I find that for a given efficiency difference between rich and poor countries, the model with intangible capital can explain more than double the income differences of the model without. Put another way, in the benchmark case, differences in intangible capital account for 14.3% of the observed income differences. I also examine the role played by intangible capital in versions of the model with barriers to accumulation. In all the variants that I consider, differences in intangible capital account for 10% to 22% of the observed income differences.

Keywords

International Income DifferencesBarriers to AccumulationIntangible CapitalIntermediate Goods
Type
Articles
Information
Macroeconomic Dynamics , Volume 17 , Issue 3 , April 2013 , pp. 621 - 645
Copyright
Copyright © Cambridge University Press 2011

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