Report on the empirical analysis on the role of intangible assets in the public sector (D7.6)

Deliverable on intangible capital in the public sector

This study analyses comparable data from the public sector, highlighting cultural capital and heritage, as well as intangible capital contributing to institutional structure. Two questions guide the investigation in this paper:
(1) Is the quality of the institutional framework related to intangible capital in the public sector;
(2) What are the differences between intangible capital and its components in the public and private sectors and how might this affect the future development of the economy as a whole?

Methodologically, the analysis is approached in two steps:
(1) The relationship between public sector intangibles and institutional quality is examined at the national level, using two established data sources: EU Klems and World Governance Indicators;
(2) A more detailed analysis of intangible capital is carried out for Slovenia using micro-level (organization-level) data provided by the Statistical Office of the Republic of Slovenia.

The results show that:
(1) In general, the accumulation of intangible capital per employee in the public sector is on average lower than the economy average, although it is higher, for example, in R&D.
(2) The dynamics of intangible capital in the public and private sectors differ significantly; in particular, intangibles in the public sector started to grow much more slowly after the 2009 crisis, although they increased steadily.
(3) Intangible capital is directly related to “better institutions” as measured by the World Governance Indicators. These could be understood as public sector “outputs”, where higher accumulation of intangible (knowledge) capital improves governance. And governance quality as a direct result of public sector intangible capital accumulation is a channel through which the public sector influences private sector productivity as well (as discussed in D 7.2 and D 7.5).
(4) An analysis of the data from Slovenia shows that there are differences in the accumulation of intangible capital between the three categories of the public sector (NACE O, P, Q), with organizational capital being particularly important relative to the others. The data also show that the accumulation of intangible capital in the public sector lags behind that in the private sector. However, the authors also point out the methodological challenge and ask whether the definition of the relevant occupations should be different for the public sector, especially for NACEO (Public Administration).

See the paper here.

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