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New Measures of U.K. Private Sector Software Investment
Abstract
Updates previous ONS work to improve estimates of the above, including application of OECD software taskforce methodology.This article updates previous work undertaken by the Office for National Statistics to improve estimates of software investment in the UK. The methodology recommended by the 2002 OECD Software Taskforce has been applied to produce new measures of own-account software investment. These results are presently being considered as part of the revisions process for Blue Book 2007. New work on measuring purchased software investment from firm-level microdata sources generates estimates closer to those published in the National Accounts.Economic & Labour Market Review (2007) 1, 17–28; doi:10.1057/palgrave.elmr.1410072
... To answer these questions we first introduce new measures of investment in copyrightprotected 'artistic originals' -wholly new art, film, literature, TV/Radio productions or music -using new data drawn from various sources including industry estimates, collecting societies and US depreciation indices. 1 Second, we apportion various knowledge investments to IPRs. Improvements to the data and methodologies used to estimate investment in artistic originals means that, when combined with official UK software investment data (Chamberlin et al, 2007), we can offer a better estimate for UK investment in copyright-protected assets. As well as other categories of knowledge assets, our dataset includes estimates of investment in research and development ('R&D'), 'Advertising' and 'Architectural and Engineering Design', upon which we base our estimates for investment in 'Patents', 'Trademarks' and 'Design Rights'. ...
... Total Software investment (Computerised information) comprises both purchased and own-account 9 , and also computerised databases. Software is already capitalised in the National Accounts, and our main source for computer software investment is contained in the ONS work described by Chamberlin et al (2007). The estimates of purchased software are based on company investment surveys. ...
This report estimates:(a) The level of UK market sector investment in knowledge assets protected by Intellectual Property Rights (IPRs) and(b) The impact of investment in those assets via their contribution to labour productivity growth in the UK market sector. Estimates for investment and the stock of IPR capital are based on previous work and includes new estimates for investment in artistic originals, funded by the Intellectual Property Office (IPO) and featured in the accompanying report.We also comment on additional spending on IP-protected goods that do not represent investments, although the coverage of this category is far from complete. Our main findings are:1) On average, between 2000 and 2008, 48% of knowledge investment in the UK market sector was protected by IPRs 2) The majority of IPR investment is on assets protected by copyright and design rights 3) In 2008 approximately 62% of the stock of knowledge assets in the UK market sector was protected by IPRs4) On average, between 1990 and 2008, 10.6% of growth in labour productivity was due to growth in capital deepening of IPR-protected assets. Comparable figures for ICT equipment and knowledge capital not protected by IPRs are 11.1% and 10.3% respectively.
... It would be inappropriate for ONS, as the official producer of estimates of GDP growth, to make such judgements, although individual users are of course free to do so. See Chamberlin (2007) for a fuller treatment of this point ...
... It is wrong to criticise statisticians for completely failing to recognise these important structural developments. The National Accounts have recently been expanded to recognise software as a capital good, even recording that produced inhouse known as own-account software (Chamberlin et al 2007). In the future, firm spending on research and development (R&D) could also be treated as capital rather than current expenditure, initially in satellite accounts and then possibly in the full set of National Accounts (GalindoRueda 2007). ...
Explains how official figures are compiled and looks at why some people think the inflation estimate should be higherConsumer price indexes measure the change in prices charged for goods and services bought for consumption by households in the UK. The Office for National Statistics publishes two main measures of consumer inflation, the consumer prices index (CPI) and the retail prices index (RPI). The latest UK inflation figures for April 2008 show the CPI rising by 3.0 per cent and the RPI rising by 4.2 per cent. It is clear from reports in the media that people are seeing big rises in the cost of food and fuel and are questioning the accuracy of our CPI and RPI rates. The consequence has been that newspapers are producing their own, selective, cost of living indexes, undermining confidence and trust in the official figures. This article explains how the official figures are compiled and looks at why some people think that the estimate of inflation should be higher. Economic & Labour Market Review (2008) 2, 59–60; doi:10.1057/elmr.2008.107
... It would be inappropriate for ONS, as the official producer of estimates of GDP growth, to make such judgements, although individual users are of course free to do so. See Chamberlin (2007) for a fuller treatment of this point ...
... It is wrong to criticise statisticians for completely failing to recognise these important structural developments. The National Accounts have recently been expanded to recognise software as a capital good, even recording that produced inhouse known as own-account software (Chamberlin et al 2007). In the future, firm spending on research and development (R&D) could also be treated as capital rather than current expenditure, initially in satellite accounts and then possibly in the full set of National Accounts (GalindoRueda 2007). ...
Presents updated analysis, using latest figures from public sector organisations for Scotland, Northern Ireland and the UKThis article presents updated analysis of public sector employment by region, with time series since 1999. The article uses the latest figures from public sector organisations for Scotland, Northern Ireland and the UK and the recently reweighted Labour Force Survey data to estimate the breakdown for English regions and Wales. Economic & Labour Market Review (2008) 2, 31–36; doi:10.1057/elmr.2008.103
... It would be inappropriate for ONS, as the official producer of estimates of GDP growth, to make such judgements, although individual users are of course free to do so. See Chamberlin (2007) for a fuller treatment of this point ...
... It is wrong to criticise statisticians for completely failing to recognise these important structural developments. The National Accounts have recently been expanded to recognise software as a capital good, even recording that produced inhouse known as own-account software (Chamberlin et al 2007). In the future, firm spending on research and development (R&D) could also be treated as capital rather than current expenditure, initially in satellite accounts and then possibly in the full set of National Accounts (GalindoRueda 2007). ...
Presents the most up-to-date figures from the Labour Force Survey, using the population estimates published in 2007The Labour Force Survey (LFS) is the source for estimates of migrant workers in the UK economy. This article presents the most up to date LFS figures using the population estimates published in 2007. It updates figures for 1997 that have been previously released in the public domain, and also provides the most recent estimates. Given the recent public interest in the topic, this article seeks to ensure greater clarity and timeliness of migrant worker reporting from the LFS in the future, in line with the recommendations of the Inter-Departmental Task Force on migration statistics (2006). It reviews the ways in which the LFS can provide migrant worker figures, and presents the new Office for National Statistics (ONS) standard definition for migrant workers. Economic & Labour Market Review (2008) 2, 18–30; doi:10.1057/elmr.2008.102
... Estimates of the rate of return on capital are excluded. ONS ended up with a non-labor cost share of 80%, which is close to the 90% here (Chamberlin et al., 2007). Furthermore, our ICT labor costs are evaluated from all ICT related occupations multiplied by 0.6, thus bringing ICT labor costs close to labor costs in more selective ICT occupations in ONS. ...
The purpose of this paper is to contribute to the development of the valuation of intangible assets and examine how it varies over time and evaluate its impact on technical change and markups and hence on firm performance. We explore a new measure of intangible assets (IA) based on expenditures on innovative labor and the creation of innovation-biased technical change. The analysis is conducted for four countries, Finland, Norway, Slovenia and Denmark, using linked employer-employee datasets and the GLOBALINTO occupation-based approach for measuring intangible assets. All four countries show robust development of technical improvement over time
that did not slow down or decline after financial crises. Intangibles and technical change have led to increases in contributions of both R&D and organizational labor. Markups have varied over time, but with an increasing trend in all countries.
... That estimate is based on an informal survey of the trade association, Intellect UK, which reported that software professionals spend 70 percent of time on capital formation. The ONS chose to apply a lower factor of 50 percent in line with OECD recommendations (Chamberlin et al., 2006(Chamberlin et al., , 2007. Sweden assumes a range of 20-76 percent for ICT professionals (ISCO 25) depending on their industry. ...
This paper uses Labor Force Survey data for European countries to estimate national investment in data assets, where the asset boundary is extended beyond that for software and databases as currently defined in the System of National Accounts. We find that: (a) in 2011–2018, 1.4 percent of EU‐28 employment was engaged in the formation of (software and) data assets, with a mean growth rate of 5 percent per annum; (b) on average in 2011–2016, expanding the asset boundary raises the level of own‐account GFCF in software and databases in the EU‐16 by 61 percent, and mean growth in real investment in own‐account software and data assets to 6.9 percent pa, compared to 2.7 percent pa in national accounts; (c) in 2011–2016, expansion of the asset boundary raises labor productivity growth in the EU‐13 from 0.79 percent to 0.83 percent pa, and the contribution of software and data capital deepening over three‐fold, from 0.03 percent to 0.10 percent pa.
... Computerized information comprises computer software, both purchased and own-account, and computerized databases. Software (and databases) are already capitalized in the National Accounts, and our main source for computer software investment is contained in the ONS work described by Chamberlin et al. (2007). Artistic originals: Previous estimates for investment in Artistic Originals were based on official ONS estimates recorded in the National Accounts. ...
Many agree that evidence exists consistent with spillovers from R&D. But is there any evidence of spillovers from a broader range of intangibles, such as software, design or training? We collect investment data for these wider intangibles for a panel of seven UK industries 1992–2007. Using the industry-level method in the R&D literature, e.g. Griliches (1973), we regress industry TFP growth on lagged external knowledge stock growth, where the latter are outside industry measures weighted by matrices based on (a) flows of intermediate consumption or (b) workers. Our main new result is that we find (controlling for time and industry effects) statistically significant correlations between TFP growth and knowledge stock growth in (a) external R&D and (b) total intangibles (excluding R&D). We show our results are robust to controls for imperfect competition and non-constant returns; likewise they are robust to including foreign R&D, and other controls, and various lags.
... First, without data on P K K N or µ, some assumption has to be made. Second, not all software workers might be writing new longlasting software, some might be performing user service and routine maintenance (Chamberlin et al., 2007). Thus observed P L L N has to be adjusted, a capitalization factor that converts all spending on knowledge to investment (i.e. ...
This paper sets out theory and measurement of how intangible investment might capture innovation and what data on intangibles
look like for the EU, Japan, and the US. We also look at complementarities between information and communications technology
(ICT) and intangibles, spillovers from intangibles to growth, and policy implications.
... -Software investment -both purchased and own account (Chamberlin 2007); -R&D capitalisation -in support of the OECD IPPTF, (Galindo-Rueda 2007, Evans et al 2008; -International comparisons of intangible investment -for the European Union Framework Seven programme on 'International comparison of Intangibles and growth accounting' (Haskel and Giorgio Marrano 2007); -Innovation investment and an innovation measurement framework -for NESTA's measurement programme (Clayton et al 2008). ...
This work contains statistical data from ONS which is Crown copyright and reproduced with the permission of the controller of HMSO and Queen's Printer for Scotland. The use of the ONS statistical data in this work does not imply the endorsement of the ONS in relation to the interpretation or analysis of the statistical data. This work uses research datasets which may not exactly reproduce National Statistics aggregates.
... Purchased software is currently treated as part of plant and machinery in the National Accounts; it is not separately deflated and is subject to the general life length for all plant and machinery. However, a series for investment in purchased software is available internally at the ONS and is an updated version of the series introduced in Chamberlin, Clayton and Farooqui (2007). ...
Capital services are the measure of capital input preferred for analysing and modelling productivity. Along with quality adjusted labour input, the volume index of capital services is a key input to multi‐factor productivity and growth accounting analyses. This article presents new estimates of capital services for 2009 along with revised estimates for 1950 to 2008. The annual series has been extended by an additional year since the previous release (Wallis, Long and Turvey, 2010) with earlier years updated to incorporate revisions throughout the time series. The experimental quarterly series of whole economy capital services has been extended and revised, while this article presents for the first time an experimental quarterly series of capital services growth for the market sector. During 2009 the growth of whole economy capital services fell to its lowest rate since the series began in 1950. Capital services for the market sector experienced negative annual growth for the first time.
... It is wrong to criticise statisticians for completely failing to recognise these important structural developments. The National Accounts have recently been expanded to recognise software as a capital good, even recording that produced inhouse known as own-account software (Chamberlin et al 2007). In the future, firm spending on research and development (R&D) could also be treated as capital rather than current expenditure, initially in satellite accounts and then possibly in the full set of National Accounts (GalindoRueda 2007). ...
Investigates some of the factors accounting for the above and why this position is now beginning to reverseUntil recently the private non-financial corporations sector was a fairly large net lender to the rest of the UK economy, reflecting relatively high gross savings and weaker capital investment. This article investigates some of the factors accounting for these trends and why this position is now beginning to reverse. Economic & Labour Market Review (2008) 2, 53–58; doi:10.1057/elmr.2008.106
This paper presents an overview of the state of the art in the field surrounding the measurement of “intangibles” for productivity analysis. The purpose of the paper is to inform indicator development and implementation in economic analysis, both at the micro and aggregated levels. The review seeks to capture the development of intangibles measurement, which has explored a variety of directions, both in terms of definition, method and data. We characterize both the diversity of the field and its development over time. Current national and firm level accounting rules lead, from an economic viewpoint on intangibles, to both an underestimation of intangible assets and productivity growth. Further work is needed, both concerning the estimation of “technical” aspects such as depreciation rates and deflators, and in the continued testing and comparison of different measurement efforts. Many opportunities exist to aggregate across or cross‐validate between the measures that are currently being used, enhancing our understanding of the properties of these measures. Even though micro‐based work faces great challenges in terms of data availability, it will be important for the estimation of depreciation rates and in developing our understanding (and thereby better measurement) of broader forms of intangibles, which can thereafter inform measurement at more aggregated levels.
During 2006, output in the UK economy grew by 2.8 per cent and the robust pace of economic growth has continued in the first half of this year. After a first estimate of quarterly GDP growth of 0.7 per cent into the first quarter of this year, the official preliminary estimate suggests that the economy expanded by 0.8 per cent into the second quarter. The economy continues to be driven by business services and finance, although the production sector actually reported quarterly growth for the first time since the first quarter of 2006. The economy is now operating around full capacity, and has recovered from the weakness that was apparent in 2005. We have revised up our forecast for this year to 2.8 per cent per annum, from 2.7 per cent per annum in our April forecast. This is due to an upward revision to estimates of GDP growth at the end of 2006 and more robust growth than we had anticipated in the first half of this year. We expect growth of just below the trend rate for the remainder of the forecast period as domestic demand growth moderates.
The UK's creative industries and creative workforce grew faster than the rest of the economy between 1997 and 2008. This article uses micro data to explore the changing patterns of creative employment in the UK's creative industries. The categories of creative employment showing the strongest growth over this period were Advertising and Software ' Computing. It is also shown that the creative industries exhibiting the highest proportions of creative employment are those with the highest proportions of sector- or skill-specific employment. The article then continues to find a broad association between the proportion of creative employment in an industry and the level of spending on intangibles. These intangibles predominately consist of knowledge capital, hence positing a link between an expert creative workforce and indicators of innovation.
This paper describes a capital services dataset for the United Kingdom developed for use in empirical work, and some of its key features. The estimates are consistent with National Accounts output estimates, making them ideal for use in growth-accounting or business-cycle analysis. The divergence between the volume of capital services and the volume of the capital stock after 1980 is highlighted. This divergence is driven by a shift in investment towards short-lived and more productive information and communication technology assets for which the flow of capital services is high. Standard capital stock measures understate growth in the productive input of capital, especially after 1990. Copyright (c) Blackwell Publishing Ltd and the Department of Economics, University of Oxford, 2009.
This article presents estimates for regional gross value added at current basic prices published in December 2008. These data are published using the European Union Nomenclature of Units for Territorial Statistics (NUTS) regions. Data are published at the NUTS1 level for the time period 1989 to 2007 and at the NUTS2 and NUTS3 level for the time period 1995 to 2006. This is followed with an overview of the methodology used in the calculation of regional GVA and the article is concluded with the Office for National Statistics’ future plans for regional economic data. Economic & Labour Market Review (2009) 3, 42–54; doi:10.1057/elmr.2009.76
Describes how the commodity flow model can be used for such estimates and discusses advantages and disadvantages of this approachThe UK is unusual among membercountries of the Organisation forEconomic Co-operation and Developmentin using business surveys on investmentexpenditure to estimate almost all nonresidentialinvestment: a demand-sideapproach. More commonly, estimates ofinvestment (or more precisely, gross fi xedcapital formation) are generated usingavailable data on the supply of capitalgoods to the economy – a commodityfl ow model. This article describes howthe commodity fl ow model can be usedto form supply-side estimates of UKinvestment and discusses some of theadvantages and disadvantages of thisapproach. Economic & Labour Market Review (2008) 2, 52–56; doi:10.1057/elmr.2008.155
Explains how this has become ONS's solution to providing access to sensitive microdata while maintaining its confidentiality and securityThis article explains how the Virtual Microdata Laboratory (VML) has become the Office for National Statistics' solution to providing access to sensitive microdata while maintaining the confidentiality and security of the data. In the four years since it was set up, the VML has gone from almost nothing to becoming a major resource for UK academic researchers. The VML has enabled both more detailed and wider research, and has influenced policy making at all levels. Looking ahead, the VML faces significant challenges and a bright future. Economic & Labour Market Review (2008) 2, 29–34; doi:10.1057/elmr.2008.73
We attempt to replicate for the UK the Corrado, Hulten and Sichel (2005, 2006) work on spending on intangible assets in the US. Their work suggests private sector expenditure (investment) on intangibles is about 13% (11%) of US GDP 1998-2000, with intangible investment about equal to tangible capital investment. Our work, using a similar method, suggests the UK private sector spent, in 2004, about £127bn on intangibles, which is about 11% of UK GDP. The implied investment figure is around £116bn (10% of GDP) which is about equal to UK investment in tangible assets. Of the £127bn expenditure, (in round numbers) about 15% is spent on software, about 10% on scientific R&D, almost 20% on non-scientific R&D (design, product development etc.), about 14% on branding, about 20% on training and the rest on organisational capital.
Describes modernising the UK's National Accounts at the forefront of a major programme involving ONS's statistical systems and processes.The Office for National Statistics is engaged in a major programme modernising its statistical systems and processes. National Accounts modernisation is at the forefront of this programme and will bring significant improvements in the quality of National Accounts estimates. This article describes these systems and processes. In order to carry forward modernisation, ONS has had to re-prioritise and reduce the scope of Blue Book 2007. Thiswill mean some additional, temporary uncertainty about the quarterly path of GDP. When completed, National Accounts modernisation will mean more coherent estimates less prone to revision, consolidating the position of the UK's National Accounts as being among the best in the world. Economic & Labour Market Review (2007) [1], 32–38; doi:10.1057/palgrave.elmr.1410058