Producing Tangible and Intangible Capital

We compare the production technologies of tangible and intangible investment using Bureau of Economic Analysis input-output tables and Integrated Industry-Level Production Account (KLEMS). We show that intangible investment is built mainly with domestic, college-educated labor and relatively few imported inputs, while tangible investment depends much more on foreign inputs and less on high-skill labor. This contrast implies that expanding intangible capital is more likely to run into domestic skill bottlenecks—making its supply less elastic and its response to subsidies more wage intensive than quantity intensive.