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Intangible Investment and the Swedish Manufacturing and Service Sector Paradox

  • Edquist, Harald

    ()

    (Research Institute of Industrial Economics (IFN))

Since the mid 1990s labor productivity growth in Sweden has been high compared to Japan, the US and the western EU-countries. While productivity growth has been rapid in manufacturing, it has been much slower in the service sector. Paradoxically, all employment growth since the mid 1990s has been created in business services. The two traditional explanations of this pattern are Baumol’s disease and outsourcing. This paper puts forward an additional explanation, based on the observation that manufacturing industries have invested heavily in intangible assets such as R&D and vocational training. In 2005–2006, intangible investment was 25 percent of value added in manufacturing, while the corresponding figure for the service sector was 11 percent. Moreover, calculations based on the growth accounting framework at the industry level in 2000–2006 show that intangible investment accounted for almost 30 percent of labor productivity growth in manufacturing. Thus, investments in intangibles that mostly are knowledge intensive services have contributed considerable to productivity growth in Swedish manufacturing since 1995.

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Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 863.

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Length: 29 pages
Date of creation: 11 Feb 2011
Date of revision:
Handle: RePEc:hhs:iuiwop:0863
Contact details of provider: Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
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Fax: +46 8 665 4599
Web page: http://www.ifn.se/
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  1. Mauro Giorgio Marrano & Jonathan Haskel & Gavin Wallis, 2009. "What Happened To The Knowledge Economy? Ict, Intangible Investment, And Britain'S Productivity Record Revisited," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(3), pages 686-716, 09.
  2. FUKAO Kyoji & HAMAGATA Sumio & MIYAGAWA Tsutomu & TONOGI Konomi, 2007. "Intangible Investment in Japan: Measurement and Contribution to Economic Growth," Discussion papers 07034, Research Institute of Economy, Trade and Industry (RIETI).
  3. Carol Corrado & Charles Hulten & Daniel Sichel, 2004. "Measuring capital and technology: an expanded framework," Finance and Economics Discussion Series 2004-65, Board of Governors of the Federal Reserve System (U.S.).
  4. Carol Corrado & Charles Hulten & Daniel Sichel, 2009. "Intangible Capital And U.S. Economic Growth," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(3), pages 661-685, 09.
  5. Mauro Giorgio Marrano & Jonathan Haskel, 2006. "How Much Does the UK Invest in Intangible Assets?," Working Papers 578, Queen Mary University of London, School of Economics and Finance.
  6. Haskel, J & Pesole, A & Galindo-Rueda, F, . "How much does the UK employ, spend and invest in design?," Working Papers 5971, Imperial College, London, Imperial College Business School.
  7. Clayton, Tony & Dal Borgo, Mariela & Haskel, Jonathan, 2009. "An Innovation Index Based on Knowledge Capital Investment: Definition and Results for the UK Market Sector," CEPR Discussion Papers 7158, C.E.P.R. Discussion Papers.
  8. Edquist, Harald, 2009. "Can Investment in Intangibles Explain the Swedish Productivity Boom in the 1990s?," Working Paper Series 809, Research Institute of Industrial Economics.
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