The rise of the knowledge economy: Productivity measurement challenges

This document examines how three structural megatrends—the expansion of services, the diffusion of ICT, and deepening globalization - have reshaped the production structure and, by extension, the measurement of productivity in advanced economies. It argues that classical growth‑accounting approaches, rooted in Solow (1957), under‑state performance in knowledge‑based systems because they insufficiently capture the contribution of intangible assets. Using experimental macroeconomic estimates of intangibles from EUKLEMS–INTANProd applied to Luxembourg and a set of comparator economies (US and EU peers), the analysis shows that including intangibles raises the level of value added per hour and modestly alters growth rankings, with Luxembourg’s post‑2007 decline turning into a slight positive trend—yet still falling short of its pre‑2007 trajectory. While measurement constraints and data comparability issues remain, the results align more closely with a knowledge‑based economy narrative and provide a practical foundation for improving productivity metrics going forward.