Intangible capital: US leads, Europe lags in productivity
A Banca d'Italia study analyzes the economic relevance of intangible capital and investments in six advanced economies from 2000-2021. It finds significant divergence in accumulation and composition, with the US leading in productivity gains.
Diverging paths in intangible capital
A Banca d'Italia study reveals a stark divergence in intangible capital accumulation across six advanced economies from 2000-2021.
Using an extended measure that includes non-accounted assets like organizational models, the research identifies two distinct groups.
The United States, United Kingdom, and France show higher levels of intangible capital and investment intensity.
In contrast, Italy, Germany, and Spain exhibit lower accumulation.
The composition of this capital also differs significantly across the Atlantic: the US economy is primarily oriented towards organizational capital, while European countries specialize more in industrial design.
Furthermore, the contribution of intangibles to labor productivity growth is notably higher in the United States.
In euro area countries, the improvement in the quality of labor input plays a relatively more significant role than intangible capital accumulation.
This suggests that not all types of intangible assets generate equivalent productivity dynamics, highlighting a structural difference in economic development.
Structural factors drive the divide
The observed gap in intangible accumulation is not attributable to a single factor but reflects a combination of structural constraints.
The study points to the prevalence of bank-based financial systems in some countries, which penalize investments lacking tangible collateral, unlike market-based systems with developed venture capital.
Sectoral specialization also plays a role, with some economies oriented towards intangible forms like design, which generate more localized returns compared to organizational capital.
Additionally, a lag in accumulating high-quality human capital is identified as a barrier to more intensive intangible investments.
Policies aimed at strengthening human capital quality could therefore have multiplicative effects on overall productive capital accumulation and productivity growth.
A blueprint for European growth
This research provides a crucial framework for understanding persistent productivity gaps in some European economies.
It underscores that addressing the intangible capital deficit requires comprehensive, coordinated interventions beyond traditional investment incentives.
Developing capital markets tailored for intangible assets and implementing active policies to enhance human capital quality are essential steps for future growth.