

“The sharp drop in intangible investment contributes to a decline in actual economic output greater than that measured by official government GDP accounts. This implies that in the actual U.S. economy, true labor productivity declined significantly during the recent recession—a finding consistent with established aggregate theory based on the neoclassical model of economic growth. Thus, McGrattan and Prescott’s experiment solves the labor productivity puzzle by reconciling the apparent mismatch between theory and economic data that show labor productivity bucking the GDP trend. “The addition of intangible capital and non- neutral technology to the model was crucial in accounting for high productivity and low GDP during the period,” they write.”
From https://www.minneapolisfed.org/article/2012/unmeasured-investment
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