Investment composition and growth: the role of intangible and tangible ICT capital in the EU and other economies

Marinela-Daniela Filip, Ralph Setzer and Diego Peréz-González

No 3242, Working Paper Series from European Central Bank

Abstract: This paper examines whether differences in the composition of investment help explain economic growth disparities in the EU and other advanced economies from 1996 to 2021. While overall investment levels in the EU and the US are broadly similar, the EU invests less in intangible and tangible ICT capital. This difference in composition is associated with part of the EU’s productivity gap with the US. Employing panel fixed effects and local projection methods, we find that intangible and tangible ICT investments -particularly in communications equipment, R&D, and other intellectual property products- are associated with higher GDP per capita growth than other forms of investment. To quantify these differences, we construct a novel investment efficiency ratio that relates the estimated economic growth contribution of each asset to its share in total investment. The results are robust across empirical methods, country samples, and time periods, and reveal substantial heterogeneity: the growth association of ICT-related investment is stronger in countries with higher income levels and greater human capital. Overall, the findings suggest that improving the allocation and efficiency of investment, rather than simply increasing its volume, is key to enhancing long-term growth. JEL Classification: E22, O47, O50, J24, C23

Keywords: intangible investment; investment efficiency; investment human capital; panel data; tangible ICT (search for similar items in EconPapers)
Date: 2026-06
New Economics Papers: this item is included in nep-eec and nep-ict
Note: 1128184
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20263242

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