ICT and Knowledge Based Capital: Productivity Growth and New Policy Challenges

Transcription

1 ICT and Knowledge Based Capital: Productivity Growth and New Policy Challenges C. Jona-Lasinio ISTAT and LUISS Lab Rome, Italy JRC-IPTS PREDICT Policy Workshop September 2014, Brussels C. Jona-Lasinio 1 / 24

2 Introduction ICT and Knowledge based capital Background literature The economic view of knowledge based capital has relevant implications on policy making ICT and new sources of growth in the EU countries Not only spillovers to R&D Complementarities with Non-R&D Intangible Capital New policy challenges C. Jona-Lasinio 2 / 24

3 Background literature I ICT is traditionally described as a general purpose technology (Bresnahan and Trajtenberg,1995) economically beneficial because it facilitates complementary innovations that in turn lead to productivity increases (Brynjolfsson and Hitt (2000)). But the causal relationship between ICT adoption and productivity growth is complex and not yet fully explored. Microeconomic evidence demonstrates that the link from firm-level ICT adoption to productivity growth is composite, emphasysing for example the relevance of co-investments in training and organizational change, to generate competitive advantage (e.g., Bresnahan, Brynjolfsson, and Hitt, 2002; Brynjolfsson, Hitt, and Yang, 2002)). C. Jona-Lasinio 3 / 24

4 Background literature II Macroeconomic evidence on the joint/disjoint contribution of ICT and intangibles to industry productivity growth is still scant, mainly because of lack of industry data on intangibles. Some macroeconomic productivity studies have nonetheless suggested that the returns to ICT and productivity growth are higher once proxies for intangibles are included, (e.g., Basu, Fernald, Oulton, Srinivasan (2004) and Acraya and Basu, (2010)). Other papers have explored directly the linkage between ICT and R&D but with differing results (Cerquera and Klein, (2008); Polder et al., (2009); Hall et al (2012)). C. Jona-Lasinio 4 / 24

5 Background literature III Intangible capital has emerged as a new relevant source of productivity growth in the U.S. (Corrado, Hulten and Sichel, 2005, 2009) and in the European economies (Corrado, Haskel, Jona-Lasinio, Iommi, 2012 and 2014a). Corrado, Haskel, Jona-Lasinio (2014), found that in a production function the estimated output elasticities of ICT capital are reduced when intangibles are introduced, suggesting that, as conjectured in much of the pre-intangible data literature, returns to ICT depend crucially on the presence of unmeasurable intangibles. C. Jona-Lasinio 5 / 24

6 Broaden our perspective for productivity analysis: spillovers and complementarities ICT Non R&D INTG R&D INNOVATION PRODUCTIVITY C. Jona-Lasinio 6 / 24

7 Extended framework Besides the direct growth contribution of each single capital asset (solid blue arrows) there are relevant synergies between them (dashed green arrows) possibly affecting productivity growth: Complementarities Spillover effects Are the spillovers (CHJ, 2014) the product of knowledge diffusion or complementarity with ICT (or both)? C. Jona-Lasinio 7 / 24

8 Empirical findings I: contributions to labour productivity growth ( ) 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00%!0.50%!1.00% Italy% Spain% Germany% France% Netherlands% Austria% United% Kingdom% Finland% Labour%Quality% Tangible%Capital%Deepening% Intangible%Capital%Deepening% TFP%Growth% C. Jona-Lasinio 8 / 24

9 Empirical findings II: Non-R&D intangibles and ICT are relevant sources of productivity growth in advanced economies ( ) 2.00& 1.50& 1.00& 0.50& 0.00&!0.50& Italy& Spain& Germany& France& Netherlands& Austria& United& Kingdom& Finland&!1.00&!1.50& Tang%noICT%% ICT% R&D%(1)% Non%R&D%Intang% TFP%Growth% C. Jona-Lasinio 9 / 24

10 Empirical findings III Based on an econometric analysis of a 10 country, 10 year KLEMS sample of productivity growth in the EU, Corrado, Haskel and Jona-Lasinio (2014) found: Productivity in ICT-intensive industries is stronger in countries with relatively fast-growing intangible capital, suggesting complementarity between ICT and intangible capital Non-R&D intangible capital generates productivity spillovers C. Jona-Lasinio 10 / 24

11 ICT and Intangible capital complementarities Contributions of Intangible and ICT Capital Growth per Hour in 10 EU Countries SWE Contribution of Intangible Capital Growth per Hour FRA ESP FIN NLD AUT GER DNK UK ITA Contribution of ICT Capital Growth per Hour Note: Scales denote percentage points. C. Jona-Lasinio 11 / 24

12 Spillovers TFP Growth in 10 EU Countries TFP Growth and Non-ICT Capital Growth in 10 EU Countries TFP Growth and ICT Capital Growth in 10 EU Countries TFP Growth FIN AUT NLD GER FRA DNK UK ITA SWE ESP TFP Growth ITA FRA GER SWE NLD ESP FIN AUT UK DNK Non-ICT Capital Growth ICT (incl software) Capital Growth Note: Scales denote percentage points. Note: Scales denote percentage points. TFP Growth and Intangible Capital Growth in 10 EU Countries TFP Growth and Labour Services Growth in 10 EU Countries TFP Growth GER ITA DNK NLD FRA UK AUT ESP SWE FIN TFP Growth GER UK SWE NLDAUT DNK FIN FRA ITA ESP Intangible (excl software) Capital Growth Labour Services Growth Note: Scales denote percentage points. Note: Scales denote percentage points. C. Jona-Lasinio 12 / 24

13 Diffusion of ICT, R&D and Non-R&D intangibles capital in EU countries ICT, R&D and Non-R&D intangibles capital accumulation is highly heterogeneous across EU countries and industries Relevant differences between manufacturing and services C. Jona-Lasinio 13 / 24

14 R&D intensity: average values Map 1 Value added share of R&D: Manufacturing and Services (Percentage values) VA share of R&D - Manufacturing (Average shares ) VA share of R&D - Services (Average shares ) [1.03,2.16] (2.16,3.29] (3.29,4.42] (4.42,5.54] (5.54,6.67] (6.67,7.80] (7.80,8.92] (8.92,10.05] (10.05,11.18] [0.26,0.41] (0.41,0.55] (0.55,0.70] (0.70,0.85] (0.85,1.00] (1.00,1.15] (1.15,1.30] (1.30,1.44] (1.44,1.59] Source: EUROSTAT C. Jona-Lasinio 14 / 24

15 Non-R&D Intangible intensity: average values Map 2 Value added share of Non-R&D intangibles: Manufacturing and Services (Percentage values) VA share of Non R&D Intangibles - Manufacturing (Average shares ) VA share of Non R&D Intangibles - Services (Average shares ) [3.72,4.41] (4.41,5.11] (5.11,5.81] (5.81,6.51] (6.51,7.21] (7.21,7.91] (7.91,8.61] (8.61,9.31] (9.31,10.01] [4.90,5.80] (5.80,6.71] (6.71,7.62] (7.62,8.52] (8.52,9.43] (9.43,10.33] (10.33,11.24] (11.24,12.15] (12.15,13.05] Source: INTAN Invest C. Jona-Lasinio 15 / 24

16 ICT intensity: average values Map 3 Value added share of ICT: Manufacturing and Services (Percentage values) VA share of ICT - Manufacturing (Average shares ) VA share of ICT - Services (Average shares ) [0.40,0.77] (0.77,1.13] (1.13,1.50] (1.50,1.86] (1.86,2.23] (2.23,2.59] (2.59,2.96] (2.96,3.33] (3.33,3.69] [1.32,2.02] (2.02,2.72] (2.72,3.41] (3.41,4.11] (4.11,4.81] (4.81,5.51] (5.51,6.21] (6.21,6.91] (6.91,7.60] Source: EUKLEMS C. Jona-Lasinio 16 / 24

17 Stylised facts Intangible capital accumulation more dynamic in services than manufacturing (excluding Finland) R&D, Non-R&D and ICT average intensities: Broad differences between Northern and Southern Europe Northern countries relatively more intangible and ICT intensive than Southern countries Differences are maintained across Manufacturing and Services Services are more intensive in Non-R&D Intangibles and ICT than manufacturing Manufacturing is more R&D intensive than services C. Jona-Lasinio 17 / 24

18 Policy issues: ICT ICT is relatively more reactive to the business cycle compared to Non-ICT investment (Bloom, Draca, Kretschmer, Sadun, Van Reenen (2010); Bacchini, Bontempi, Golinelli, Jona-Lasinio, 2014) Main ICT investment determinants: Financial conditions (short-run) Uncertainty (long-run) Key variable for counter-cyclical policies C. Jona-Lasinio 18 / 24

19 Policy issues: R&D If R&D is internationally mobile across countries, it is not only home country policy but home relative to other competing countries that matters. R&D tax credits might produce beggar thy neighbour effects (Wilson, (2009), Haskel et al, (2014)) Does this finding mean that R&D tax policy should be centralised? C. Jona-Lasinio 19 / 24

20 Policy issues: Non-R&D intangibles Intangible assets may have a stronger effect on productivity growth when interacted with other variables, particularly with ICT. The strong correlation between Non-R&D intangibles and ICT suggests they are strategic variables in the innovation policy agenda. C. Jona-Lasinio 20 / 24

21 Conclusion Policymakers need more accurate data to identify sound policies to foster investment in innovation and the diffusion of innovative activity Full accounting of investment requires estimates at the industry level and for the public sector: Detailed analysis of innovation producing sectors (PREDICT) Improved measures of business investment (EUKLEMS, INTAN-Invest) Public sector estimates of intangibles (SPINTAN) C. Jona-Lasinio 21 / 24

22 Backup slides C. Jona-Lasinio 22 / 24

23 The data INTAN-Invest harmonized cross country industry estimates of intangible investments ( Country coverage: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, Portugal, Spain, Sweden, United Kingdom. Industry coverage: NACE Rev2 sectors A through N (excluding real estate) plus sectors R and S. Time coverage: EUKLEMS (2012 release) C. Jona-Lasinio 23 / 24

24 Extended Growth Accounting Model European countries: AT, FI, FR, DE, ES, IT, NL, UK Industries: Agriculture, Mining, Manufacturing, Utilities, Construction, Trade, Financial services, Other services Asset categories and sub-categories: Tangible Non-ICT, ICT, R&D, and Non-R&D intangibles Software, R&D, Arch-Des, NFP, Min-Art, Adv-Mkt, Org cap, Training C. Jona-Lasinio 24 / 24