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The Untouchables - In Brief

December 1, 2005


Douglas Clement Editor, The Region
The Untouchables - In Brief

Getting a Grip

Ongoing research by Minneapolis Fed economists Ellen McGrattan and Ed Prescott reveals that conventional wisdom regarding productivity and stock market performance is impaired by incomplete measurement.

In five papers written over five years, they explore the importance of both intangible investment and taxes, finding that:

  • Outlays on intangible goods—such as research and development—are treated as an expense (not investment) in government statistics, leading to underestimates of output and value.

  • Changes in taxation of corporate profits and shareholder distributions have a large impact on equity value, accounting for most stock market trends in the United States and the United Kingdom.

The Untouchables [complete article]

Douglas Clement
Editor, The Region

Douglas Clement was a managing editor at the Minneapolis Fed, where he wrote about research conducted by economists and other scholars associated with the Minneapolis Fed and interviewed prominent economists.