The document discusses the impact of intangible assets and ICT on productivity growth in European economies, highlighting the complex relationship between ICT adoption, innovation, and productivity. It provides empirical evidence showing that faster-growing economies tend to have more intangible capital, leading to significant productivity enhancements. Additionally, it emphasizes the importance of non-R&D intangibles in driving productivity growth, suggesting that strategies focusing on these investments can be beneficial for firms.

1. Intangibles and industry productivity growth:
evidence from the European economies
C. Jona-Lasinio
ISTAT and LUISS Lab
Rome, Italy
Universitat Politecnica de Valencia
22 September 2014, Valencia
C. Jona-Lasinio 1 / 32

2. Introduction
Background literature
Extended view of the sources of growth
Complementary relations and productivity growth
Empirical evidence for EU countries-industries
New policy challenges
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3. Background literature I
ICT is traditionally described as a general purpose technology
(Bresnahan and Trajtenberg,1995) economically beneficial
because it facilitates complementary innovations that in turn lead
to productivity increases (Brynjolfsson and Hitt (2000)).
But the causal relationship between ICT adoption and
productivity growth is complex and not yet fully explored.
Microeconomic evidence demonstrates that the link from
firm-level ICT adoption to productivity growth is composite,
emphasysing for example the relevance of co-investments in
training and organizational change, to generate competitive
advantage (e.g., Bresnahan, Brynjolfsson, and Hitt, 2002;
Brynjolfsson, Hitt, and Yang, 2002)).
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4. Background literature II
Macroeconomic evidence on the joint/disjoint contribution of ICT
and intangibles to industry productivity growth is still scant,
mainly because of lack of industry data on intangibles.
Some macroeconomic productivity studies have nonetheless
suggested that the returns to ICT and productivity growth are
higher once proxies for intangibles are included, (e.g., Basu,
Fernald, Oulton, Srinivasan (2004) and Acraya and Basu, (2010)).
Other papers have explored directly the linkage between ICT and
RD but with differing results (Cerquera and Klein, (2008);
Polder et al., (2009); Hall et al (2012)).
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5. Background literature III
Intangible capital has emerged as a new relevant source of
productivity growth in the U.S. (Corrado, Hulten and Sichel,
2005, 2009) and in the European economies (Corrado, Haskel,
Jona-Lasinio, Iommi, 2012 and 2014a).
Corrado, Haskel, Jona-Lasinio (2014), found that in a production
function the estimated output elasticities of ICT capital are
reduced when intangibles are introduced, suggesting that, as
conjectured in much of the pre-intangible data literature, returns
to ICT depend crucially on the presence of unmeasurable
intangibles.
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6. RD and Non-RD Intangibles
Non-RD intangibles: what are they?
The$CHS$framework$
BroadcategoryTypeofInvestment
Computerized
Information
Innovative
Property
Economic
Competencies
• Software
• Databases
• RD
• Mineral exploration
• Entertainment and artistic originals
• Design and other new product development costs
• Branding (mkt. research and long-lived advertising)
• Firm-specific human capital (training)
• Organizational capital (business process investment)
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7. Broaden our perspective for productivity analysis:
spillovers and complementarities
ICT
PRODUCTIVITY
Non
RD
INTG
RD
INNOVATION
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8. Extended framework
Besides the direct growth contribution of each single capital asset
(solid blue arrows) there are relevant synergies between them
(dashed green arrows) possibly affecting productivity growth:
Complementarities
Spillover effects
Are the spillovers (CHJ, 2014) the product of knowledge diffusion
or complementarity with ICT (or both)?
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9. Empirical findings III
Based on an econometric analysis of a 10 country, 10 year
KLEMS sample of productivity growth in the EU, Corrado, Haskel
and Jona-Lasinio (2014) found:
Productivity in ICT-intensive industries is stronger in countries
with relatively fast-growing intangible capital, suggesting
complementarity between ICT and intangible capital
Non-RD intangible capital generates productivity spillovers
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10. ICT and Intangible capital complementarities
Contributions of Intangible and ICT Capital Growth per Hour in 10 EU Countries 1998-2007
AUT
SWE
GER
DNK
ESP
FIN
FRA
ITA
NLD
UK
.2 .4 .6 .8
Contribution of Intangible Capital Growth per Hour
.1 .2 .3 .4 .5
Contribution of ICT Capital Growth per Hour
Note: Scales denote percentage points.
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11. Spillovers
TFP Growth in 10 EU Countries 1998-2007
TFP Growth and Non-ICT Capital Growth in 10 EU Countries 1998-2007
AUT
GER
DNK
ESP
FIN
FRA
ITA
NLD
UK SWE
-1 0 1 2 3
TFP Growth
1 2 3 4 5
Non-ICT Capital Growth
Note: Scales denote percentage points.
TFP Growth and ICT Capital Growth in 10 EU Countries 1998-2007
3
2 SWE UK AUT
1 GER
0 1 -DNK
ESP
FIN
FRA
ITA
NLD
TFP Growth
8 10 12 14 16
ICT (incl software) Capital Growth
Note: Scales denote percentage points.
TFP Growth and Intangible Capital Growth in 10 EU Countries 1998-2007
AUT
GER
DNK
ESP
FIN
FRA
ITA
NLD
UK SWE
-1 0 1 2 3
TFP Growth
2 3 4 5 6
Intangible (excl software) Capital Growth
Note: Scales denote percentage points.
TFP Growth and Labour Services Growth in 10 EU Countries 1998-2007
UK SWE
AUT
GER
DNK
ESP
FIN
FRA
ITA
NLD
-1 0 1 2 3
TFP Growth
0 1 2 3 4
Labour Services Growth
Note: Scales denote percentage points.
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12. Intangible investments (chain linked volumes):
compounded average rates of growth 1995-2010
10.00# Manufacturing+ Services+
9.00#
8.00#
7.00#
6.00#
5.00#
4.00#
3.00#
2.00#
1.00#
0.00#
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13. Diffusion of ICT, RD and Non-RD intangibles capital in
EU countries
Intangible capital accumulation more dynamic in services than
manufacturing (excluding Finland)
What about the diffusion of ICT and Intangible assets across EU
countries-industries?
..and within intangible assets are there relevant differences
across manufacturing and services?
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14. RD intensity: average values 1995-2010
Map 1 – Value added share of RD: Manufacturing and Services
(Percentage values)
Source: EUROSTAT
[1.03,2.16]
(2.16,3.29]
(3.29,4.42]
(4.42,5.54]
(5.54,6.67]
(6.67,7.80]
(7.80,8.92]
(8.92,10.05]
(10.05,11.18]
VA share of RD - Manufacturing (Average shares 1995-2010)
[0.26,0.41]
(0.41,0.55]
(0.55,0.70]
(0.70,0.85]
(0.85,1.00]
(1.00,1.15]
(1.15,1.30]
(1.30,1.44]
(1.44,1.59]
VA share of RD - Services (Average shares 1995-2010)
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15. Non-RD Intangible intensity: average values 1995-2010
Map 2 – Value added share of Non-RD intangibles: Manufacturing and Services
(Percentage values)
VA share of Non RD Intangibles - Manufacturing (Average shares 1995-2010)
Source: INTAN –Invest
[3.72,4.41]
(4.41,5.11]
(5.11,5.81]
(5.81,6.51]
(6.51,7.21]
(7.21,7.91]
(7.91,8.61]
(8.61,9.31]
(9.31,10.01]
VA share of Non RD Intangibles - Services (Average shares 1995-2010)
[4.90,5.80]
(5.80,6.71]
(6.71,7.62]
(7.62,8.52]
(8.52,9.43]
(9.43,10.33]
(10.33,11.24]
(11.24,12.15]
(12.15,13.05]
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16. ICT intensity: average values 1995-2010
Map 3 – Value added share of ICT: Manufacturing and Services
(Percentage values)
Source: EUKLEMS
[0.40,0.77]
(0.77,1.13]
(1.13,1.50]
(1.50,1.86]
(1.86,2.23]
(2.23,2.59]
(2.59,2.96]
(2.96,3.33]
(3.33,3.69]
VA share of ICT - Manufacturing (Average shares 1995-2010)
[1.32,2.02]
(2.02,2.72]
(2.72,3.41]
(3.41,4.11]
(4.11,4.81]
(4.81,5.51]
(5.51,6.21]
(6.21,6.91]
(6.91,7.60]
VA share of ICT - Services (Average shares 1995-2010)
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17. Stylised facts
RD, Non-RD and ICT average intensities:
Broad differences between Northern and Southern Europe
Northern countries relatively more intangible and ICT
intensive than Southern countries
Differences are maintained across Manufacturing and Services
Services are more intensive in Non-RD Intangibles and ICT
than manufacturing
Manufacturing is more RD intensive than services
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18. Extended Growth Accounting Model
European countries:
AT, FI, FR, DE, ES, IT, NL, UK
Industries:
Agriculture, Mining, Manufacturing, Utilities, Construction,
Trade, Financial services, Other services
Asset categories and sub-categories:
Tangible Non-ICT, ICT, RD, and Non-RD intangibles
Software, RD, Arch-Des, NFP, Min-Art, Adv-Mkt,
Org cap, Training
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19. Contributions to labour productivity growth: 1995-2009
3.00%
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
!0.50%
!1.00%
Italy% Spain% Germany% France% Netherlands% Austria% United%
Kingdom%
Finland%
Labour%Quality% Tangible%Capital%Deepening% Intangible%Capital%Deepening% TFP%Growth%
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20. TFP, Tangible Non-ICT, ICT, RD, and Non-RD
Intangible Capital Deepening: 1995-2009
2.00
1.50
1.00
0.50
0.00
!0.50
!1.00
!1.50
Italy Spain Germany France Netherlands Austria United
Kingdom
Finland
Tang%noICT%% ICT% RD%(1)% Non%RD%Intang% TFP%Growth%
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21. GA - Main results (1)
More intangible-intensive economies are the faster growth
performers. More tangible-intensive countries are the slower
growth performers.
ICT exceeds tangible non-ICT capital contribution in the best
performers. The opposite holds in the slow growing economies.
RD and Non-RD intangibles are relevant sources of growth
in almost all sample countries but
ICT, RD and Non-RD intangible capital contribution is
higher than tangible non-ICT capital contribution in fast
growing countries;
Overall contribution of RD and Non-RD intangibles is
relatively low in the slow growing economies;
Non-RD intangible contributes more than RD capital
deepening.
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22. Industry contributions to labour productivity growth:
1995-2009
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
!0.50%
IT% ES% DE% FR% NLD% AT% FI% UK%
AgricultureFishing/ Manufacturing/ Other/industries/(2)/ Trade/ Financial/Services/ Other/Services/
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23. RD and Non-RD Intangible Capital Deepening:
contributions to industry productivity growth 1995-2009
2.50#
2.00#
1.50#
1.00#
0.50#
0.00#
Manufacturing+ Trade+ Financial+Services+ Other+Services+
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24. GA - Main results (2)
High heterogeneity of industry contributions to productivity
growth
Manufacturing (RD intensive) is the driving sector in FI,
Services (Non-RD Intangible intensive) in NLD, AT and UK
On average, Non-RD Intangible capital provides a higher
contribution than RD and mainly in the service sectors
ICT and Non-RD Intangibles are the main drivers of services
productivity growth.
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25. Summing up
Non-RD intangibles and ICT are relevant sources of productivity
growth in advanced economies
Strong correlation between Non-RD intangibles and ICT
suggests they are strategic policy variables
Innovation is more than ICT. Complementary organizational and
training investments will continue to be important for firms and
industries to thrive in the digital future
Intangible investments include more than RD. Software,
databases, and design are sizeable and important aspects of NPD
in services industries
The non-rival nature of intangibles suggest they can be (and are
being) re-deployed across the globe yet we do not track this at all
well.
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26. Backup slides
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