The rule of law and investment in intangible capital: Evidence for the EU-16, 1996-2017 (D7.4)

The role of government in providing the foundation for economic development shapes the environment in which businesses operate. This enabling environment is a critical determinant of businesses and economic growth. Therefore, the effects of this driver on investment in intangible capital – as a factor influencing productivity growth – need to be ascertained.

This study contributes to the macroeconomic literature by adding to our understanding of drivers such as RoL in influencing investment in intangible capital by businesses and, therefore, influencing productivity growth. The paper analyses the relationship between the rule of law (RoL) and intangible capital investment by businesses within a sample of 16 European countries, over the period from 1996 to 2017. The study confirms the significant and positive relationship between RoL and investment in intangibles and highlights RoL as a driving factor of investment in intangibles and, hence, labour productivity growth in the EU-16.

See the paper here.