Skills and Economic Performance: The Impact of Intangible Assets on UK Productivity Growth

Improving economic growth is a key policy objective for the Government. Therefore, understanding the drivers of productivity growth is a fundamental requirement for effective economic policy. Current measurements of productivity, based on the ‘tangible’ inputs of capital and labour, do not fully account for variations in performance. As a result of this there is a growing interest in ‘intangible’ assets and their potential to help us to better understand the sources of growth. Existing studies at the macro level suggest intangible assets make a significant contribution to productivity growth and micro level studies suggest intangible assets help to explain differences in performance between firms. Because intangible assets are embedded in knowledge workers, and as such are difficult to disentangle from firms’ human capital, this research develops measures of intangible assets for UK firms based on the labour input of workers in high skilled organisation, R&D and IT related occupations. These measures are then used to assess how firms employ intangible assets to increase productivity and raise economic performance.