The Contribution of Intangible Assets to Labour Productivity Growth in Singapore, 2009-2019

Intangible assets are assets that do not have a physical or financial embodiment, including knowledge capital (e.g., computer software, research and development [R&D], intellectual property [IP]) and other intangible inputs (e.g., branding, content creation, buyer-seller trust, lender-borrower relationships, organisational effectiveness, managerial practices). In Singapore, the share of intangible assets in the economy has risen steadily over time, broadly reflecting an increase in investments in R&D and computer software.

This article adopts a growth accounting approach at the aggregate and sectoral levels to examine the contribution of capital deepening in intangible assets (i.e., increase in amount of intangible capital per hour worked) to labour productivity growth between 2009 and 2019.

At the aggregate level, capital deepening in intangible assets was found to be a major contributor to labour productivity growth from 2009 to 2019, accounting for 1.0 percentage-point (pp) per annum (p.a.) of the 3.0 per cent p.a. growth in labour productivity over this period. In turn, the capital deepening in intangible assets was supported by investments in R&D (0.7pp p.a.) and computer software (0.3pp p.a.). Compared to other advanced economies, capital deepening in intangible assets was a more dominant driver of labour productivity growth in Singapore between 2009 and 2017.

At the sectoral level, intangible capital deepening was found to be a strong contributor to productivity growth in the outward-oriented Wholesale Trade, Manufacturing and Finance & Insurance sectors, as well as the domestically-oriented Administrative & Support Services sector, although the relative contributions of R&D and computer software investments differed in these sectors.

With accelerating technological advancements, investments in intangible assets can help firms to overcome their physical constraints and tap on the global marketplace. Under the Singapore IP Strategy (SIPS) 2030, the Singapore Government will continue to support firms in the adoption of intangible assets (including IP) for growth, and complement these efforts by raising the relevant capabilities of our workforce.

The views expressed in this paper are solely those of the authors and do not necessarily reflect those of the Ministry of Trade and Industry (MTI), Agency for Science, Technology and Research (A*STAR), Building and Construction Authority (BCA), Department of Statistics (DOS), Economic Development Board (EDB) or Intellectual Property Office of Singapore (IPOS).

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