Intangible Capital, Productivity, and Labor Markets

Modern production requires increasing use of intangible assets such as computerized information, innovation-generating activities, and organizational capital. Investments in these assets have been growing rapidly over the past few decades. They represent a greater share of aggregate economic activity in the United States than in Europe, although some European countries such as Sweden invest more than the US. Intangible assets are an important contributor to raising labor productivity growth, both directly through increasing capital per worker and indirectly through changing production practices. However, there is evidence that they are associated with a reduced return to labor, especially for workers with skills below university level.