Japan's Intangible Capital and Valuation of Corporations in a Neoclassical Framework

This paper estimates the economic value in the 1980s and 1990s of corporate as sets in Japan,including both tangible and intangible as sets, based on the neo-classical framework of McGrattan and Prescott(2005). Our estimates use anew micro-data set that comprises the accounting statements of all listed, non-financial companies in Japan. We find that in 1981-86, a period that immediately preceded Japan's so-called "bubble economy", our assessed value of corporate productiveas-sets, net of the value of corporate debt,is approximately equal to the actual stock market value of Japanese corporate equity. The fnding differs from previous results based on studies of aggregated at a sets or based on studies of micro data sets that neglected intangible capital. We also show that the Japanese ratio of the amount of intangible capital stock to the amount of tangible capital stock is comparable to the analogous ratios for the U.S. and U.K.