We extend the conventional Solow growth accounting model to allow innovation to affect consumer welfare directly. Our … model is based on Lancaster’s New Approach to Consumer Theory, in which there is a separate “consumption technologyâ …

expenditures that are current consumption versus those that are capital investment. This framework suggests that any business … outlay that is intended to increase future rather than current consumption should be treated as capital investment. Applying …, business investment in intangible capital was as large as business investment in traditional, tangible capital. Relative to …