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

Purpose—This contribution aims to revisit the relationship between intangible capital and labor 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). Design/methodology/approach—To achieve these aims, the study employs a cross-country growth-accounting econometric estimation approach using the largest, up-to-date database available encompassing 16 EU countries over the period 2000–2015. It 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: 1) computerized information, 2) innovative property, and 3) economic competencies. Findings—First, when accounting for intangibles, this contribution finds that these intangibles have become the dominant source of labor productivity growth in the EU, explaining up to 66% of growth. Second, when accounting for times of crisis (2008–2013), in contrast to tangible capital, it detects a solid positive relationship between intangibles and labor productivity growth. Third, when accounting for the economic recovery (2014–2015), it finds a highly significant and remarkably strong relationship between intangible capital and labor productivity growth. Originality/value—The study corroborates the importance of intangibles for labor 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.