Revisiting Intangible Capital and Labour Productivity Growth, 2000-2015: Accounting for the Crisis and Economic Recovery in the EU

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 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). To achieve these aims, this paper employs a cross-country growth accounting econometric estimation approach using the largest, up-to-date database available encompassing 16 EU countries over the time-period 2000-2015. The paper accounts for times of crisis (2008-2013) and of economic recovery (2014-2015). It separately estimates the contribution of three distinct dimensions of intangible capital: i) computerized information, ii) innovative property and iii) economic competencies. First, when accounting for intangibles, the paper finds that these 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 (2008-2013), in contrast to tangible capital, the paper detects a solid positive relationship between intangibles and labour productivity growth. Third, when accounting for the economic recovery (2014-2015), the paper finds a highly significant and remarkably 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 is currently reflected in official statistics.