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Review of Income and Wealth

Can Investment in Intangibles Explain the Swedish Productivity Boom in the 1990s?

Journal Article
Reference
Edquist, Harald (2011). “Can Investment in Intangibles Explain the Swedish Productivity Boom in the 1990s?”. Review of Income and Wealth 57(4), 658–682. doi.org/10.1111/j.1475-4991.2010.00436.x

Author
Harald Edquist

In the early 1990s the Swedish economy experienced a severe economic and financial crisis which resulted in a substantial GDP decrease. Even though the crisis was not a complete surprise for many economists, almost no one expected that the Swedish economy would be prospering with booming productivity growth only a few years later. Economists have presented three explanations for the fast recovery and productivity growth in 1995–2006: market reforms, crisis recovery, and the impact of ICT. This paper offers an alternative view, emphasizing instead firms’ substantial investment in intangible assets such as R&D, design, and advertising. Based on the growth accounting framework, intangible capital accounted for more than 30 percent of the labor productivity growth in the Swedish business sector from 1995 to 2006. Thus, Swedish TFP growth, one of the highest among OECD countries, is reduced substantially when investment in intangibles is included in the growth accounting analysis.