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Is the EU ready for the next generation of investment? The case of France and Germany

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  • Nonnis, Alberto
  • Roth, Felix
  • Bounfour, Ahmed

Abstract

This paper presents a puzzling finding: although France invests twice as much in intangible capital vis-à-vis Germany, both countries have similar LPG rates over the studied period from 1995 until 2020. We find that this difference in investments is driven by France's four- and two-and-a-half-fold investments in software and organizational capital. Our paper offers three perspectives to clarify the puzzle. First, higher investments in intangible capital in France might suggest a better readiness of the country towards the next generation of investment. However, France's investments in intangibles appear to be less efficient compared to those of Germany. Third, measurement problems in the software and organizational capital investment series are also to be considered to understand this major puzzle.

Suggested Citation

  • Nonnis, Alberto & Roth, Felix & Bounfour, Ahmed, 2024. "Is the EU ready for the next generation of investment? The case of France and Germany," Hamburg Discussion Papers in International Economics 16, University of Hamburg, Department of Economics.
    • Handle: RePEc:zbw:uhhhdp:16
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    References listed on IDEAS

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    1. Erik Brynjolfsson & Daniel Rock & Chad Syverson, 2021. "The Productivity J-Curve: How Intangibles Complement General Purpose Technologies," American Economic Journal: Macroeconomics, American Economic Association, vol. 13(1), pages 333-372, January.
    2. Corrado, Carol & Haskel, Jonathan & Jona-Lasinio, Cecilia & Iommi, Massimiliano, 2016. "Intangible investment in the EU and US before and since the Great Recession and its contribution to productivity growth," EIB Working Papers 2016/08, European Investment Bank (EIB).
    3. Keung-Oui Kim & Ahmed Bounfour & Alberto Nonnis & Altay Özaygen, 2021. "Measuring ICT externalities and their contribution to productivity: a bilateral trade based approach," Post-Print hal-03825279, HAL.
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    6. Alberto Nonnis & Ahmed Bounfour & Altay Özaygen & Keung-Oui Kim & Tatiana Beliaeva, 2021. "The combined contribution of intangible capital and global value chain participation to productivity," Post-Print hal-03825282, HAL.
    7. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
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    9. Kim, Keungoui & Bounfour, Ahmed & Nonnis, Alberto & Özaygen, Altay, 2021. "Measuring ICT externalities and their contribution to productivity: A bilateral trade based approach," Telecommunications Policy, Elsevier, vol. 45(2).
    10. Stephen Bond & Anke Hoeffler & Jonathan Temple, 2001. "GMM Estimation of Empirical Growth Models," Economics Papers 2001-W21, Economics Group, Nuffield College, University of Oxford.
    11. Nonnis, Alberto & Bounfour, Ahmed & Kim, Keungoui, 2023. "Knowledge spillovers and intangible complementarities: Empirical case of European countries," Research Policy, Elsevier, vol. 52(1).
    12. Crouzet, Nicolas & Eberly, Janice, 2021. "Intangibles, markups, and the measurement of productivity growth," Journal of Monetary Economics, Elsevier, vol. 124(S), pages 92-109.
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    Cited by:

    1. Ahmed BOUNFOUR & EDAMURA Kazuma & ISHIKAWA Takayuki & MIYAGAWA Tsutomu & Alberto NONNIS & TONOGI Konomi, 2024. "The Productivity J-curve from an International Perspective: Is the U.S. a unique case?," Discussion papers 24079, Research Institute of Economy, Trade and Industry (RIETI).

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    Keywords

    Intangible capital; Labour Productivity; Germany; France; EU;
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