Intangible Capital and Growth: Essays on Labor Productivity, Monetary Economics, and Political Economy, Vol. 1

Advanced economies have been transforming into knowledge economies, with intangible capital being a crucial element in their growth performance. It encompasses investments in education, informal and formal institutions, and businesses aimed at enhancing their knowledge base.

Format: Hardback
Length: 185 pages
Publication date: 09 March 2022
Publisher: Springer Nature Switzerland AG

For several decades, advanced economies worldwide have been undergoing a remarkable transformation towards becoming knowledge economies. This shift has gained widespread recognition, as it has become evident that intangible capital plays a pivotal role in driving the growth and success of these economies and their firms. The term "intangible capital" serves as a valuable tool for capturing those aspects of capital that are not readily tangible but nonetheless hold immense significance for economic growth. It encompasses a wide range of investments, including those made by the public sector and households in education (human capital), informal (social capital), and formal (rule of law) institutions. Additionally, it includes investments by businesses aimed at enhancing their knowledge base, such as software, innovative property, and economic competencies.

The importance of intangible capital in driving economic growth has been extensively studied and documented. One of the key findings is that intangible capital investments contribute to the development of human capital, which is a fundamental driver of productivity and innovation. By investing in education and training, individuals acquire the skills and knowledge necessary to perform their jobs effectively, leading to increased productivity and economic output. Moreover, intangible capital investments in social capital, such as networks, relationships, and trust, enhance social cohesion and cooperation, which are essential for promoting economic development. Formal institutions, such as the rule of law, provide a stable and predictable legal framework that fosters investment and entrepreneurship, contributing to economic growth.

In addition to these direct benefits, intangible capital investments also have indirect effects on economic growth. For instance, investments in research and development (R&D) lead to the creation of new products, technologies, and services, which can stimulate economic growth and create new job opportunities. Similarly, investments in innovative property, such as intellectual property rights, can attract foreign direct investment and promote technological advancements, leading to economic growth.

However, the creation and accumulation of intangible capital are not without challenges. One of the key challenges is the lack of a comprehensive framework for measuring and valuing intangible capital. This lack of transparency and consistency in valuation methods can make it difficult for investors and policymakers to assess the true value of intangible capital investments and make informed decisions. Additionally, the high upfront costs associated with intangible capital investments can be a barrier to entry for small and medium-sized businesses, limiting their ability to participate in the knowledge economy.

To address these challenges, policymakers and businesses need to prioritize investments in intangible capital. This can include measures such as increasing funding for research and development, promoting innovation and entrepreneurship, and developing a comprehensive framework for measuring and valuing intangible capital. Additionally, policymakers can work to create policies that promote investment in intangible capital, such as tax incentives, subsidies, and grants.

In conclusion, intangible capital has emerged as a crucial element in the growth performance of advanced economies worldwide. It encompasses investments in education, social capital, formal institutions, and knowledge-based assets by the public sector, households, and businesses. By recognizing the importance of intangible capital and investing in it, policymakers and businesses can foster economic growth, create new job opportunities, and improve the quality of life for individuals. However, addressing the challenges associated with intangible capital creation and accumulation requires a comprehensive and coordinated approach, involving policymakers, businesses, and individuals.

Weight: 471g
Dimension: 235 x 155 (mm)
ISBN-13: 9783030861858
Edition number: 1st ed. 2022