Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 863: Intangible Investment and the Swedish Manufacturing and Service Sector Paradox

Harald Edquist ()
Additional contact information
Harald Edquist: Research Institute of Industrial Economics (IFN), Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden

Abstract: Since the mid 1990s labor productivity growth in Sweden has been high compared to Japan, the US and the western EU-countries. While productivity growth has been rapid in manufacturing, it has been much slower in the service sector. Paradoxically, all employment growth since the mid 1990s has been created in business services. The two traditional explanations of this pattern are Baumol’s disease and outsourcing. This paper puts forward an additional explanation, based on the observation that manufacturing industries have invested heavily in intangible assets such as R&D and vocational training. In 2005–2006, intangible investment was 25 percent of value added in manufacturing, while the corresponding figure for the service sector was 11 percent. Moreover, calculations based on the growth accounting framework at the industry level in 2000–2006 show that intangible investment accounted for almost 30 percent of labor productivity growth in manufacturing. Thus, investments in intangibles that mostly are knowledge intensive services have contributed considerable to productivity growth in Swedish manufacturing since 1995.

Keywords: Intangibles; Manufacturing; Productivity growth; Service sector; Sector analysis

JEL-codes: O14; O32; O33

29 pages, February 11, 2011

Full text files

wp863.pdf PDF-file 

Download statistics

Questions (including download problems) about the papers in this series should be directed to Elisabeth Gustafsson ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2018-01-23 23:34:39.