Working Paper: CEPR ID: DP18359
Authors: Frederico Belo; Yu Li; Juliana Salomao; Maria Ana Vitorino
Abstract: We estimate the value of intangible capital across 77 countries through the valuation approach of a neoclassical model of investment with two heterogeneous types of capital inputs: physical capital (e.g. plants and machines) and intangible capital (e.g. brand name, stock of knowledge). We estimate the structural model using data on public listed firms across the world, and infer the contribution of intangible capital for the firm's market value in each country. We find that the neoclassical model with two types of capital fits the data well for most of the major economies. The good model fit is a consequence of the inclusion of intangible capital and country/region specific adjustment cost parameters, which suggests that frictions in the accumulation of intangible capital have a country/region specific component. Finally, we find that intangible capital accounts for the large share of the market value of firms in all countries. The growth of intangible capital value is faster in emerging economies such as China, but slower in developed economies such as the United States. Our estimation results explain the geography of intangible capital investment premium, by inferring the latent parameters for intangible capital valuation.
Keywords: Valuation
JEL Codes: D21; D22; E22; E24; G12; G32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Intangible capital (E22) | Firm market value (G32) |
| Economic context (N00) | Valuation of intangible assets (O34) |
| Adjustment costs for intangible capital (E22) | Valuation of firms (G32) |
| Intangible capital share (E22) | Additional return per year (G12) |