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The effect of physical and intangible capital on labour productivity: role of institutional and development factors

Author

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  • Valentin Lovric

    (Croatian National Bank, Zagreb, Hrvatska)

Abstract

Economists agree that physical and intangible capital can have a positive impact on productivity growth. However, the dependence of intangible capital on adequate institutions may lead to its weak impact on productivity in countries with weak institutions. The aim of this paper is to assess the link between investments in physical and intangible capital on the one hand and productivity on the other. For determining differences in the level of effect of physical and intangible capital on productivity depending on institutional and developmental characteristics of countries, the research is divided into two parts. First, we assessed regression models for Croatia, after which we used panel analysis to evaluate a number of models for highly developed countries with quality institutions. The results suggest a significant positive effect of physical and intangible capital in advanced economies, while in Croatia only physical capital has a significant impact.

Suggested Citation

  • Valentin Lovric, 2026. "The effect of physical and intangible capital on labour productivity: role of institutional and development factors," Public Sector Economics, Institute of Public Finance, vol. 50(2), pages 215-240.
    • Handle: RePEc:ipf:psejou:v:50:y:2026:i:2:p:215-240
    DOI: 10.3326/pse.50.2.2
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    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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