Revisiting intangible capital and labour productivity growth, 2000–2015 (D6.7)

This paper aims to revisit the relationship between intangible capital and labour productivity growth using the largest, up-to-date macro database (2000–2015) available encompassing 16 EU countries to corroborate the econometric findings of earlier work and to generate novel econometric evidence by accounting for times of crisis (2008– 2013) and economic recovery (2014–2015). It separately estimates the contribution of three distinct dimensions of intangible capital: (1) computerized information, (2) innovative property and (3) economic competencies.

First, when accounting for intangibles, the paper finds that these intangibles have become the dominant source of labour productivity growth in the EU, explaining up to 66 percent of growth. Second, when accounting for times of crisis, in contrast to tangible capital, the paper detects a positive relationship between intangibles and labour productivity growth. Third, when accounting for the economic recovery, the paper finds a significant and strong relationship between intangible capital and labour productivity growth.

This paper corroborates the importance of intangibles for labour productivity growth and thereby underlines the necessity to incorporate intangibles into today’s national accounting frameworks in order to correctly depict the levels of capital investment being made in European economies. These levels are significantly higher than those currently reflected in the official statistics.

Read the paper here.