Intangible capital level of economic development and middle income trap

Jan Winiecki, Łukasz Cywiński, Ruslan Harasym, Robert Pater, Kazimierz Tarchalski
WSIiZ Working Papers
No 17.
The last 10-15 years witnessed an increased interest in the issue of intangible capital in contrast to traditional, tangible, physical capital. It increased understanding of economic growth factors and its inclusion led to reduction of the Solow residual. Experience of well-developed economies show large meaning of the intangible capital for economic growth and structural change. Even though the relative level of intangible capital is smaller in less developed countries, they undergo serious structural changes as they acquire more intangibles. Serious problems arise with measurement of this type of capital. In this article we analyze the effects of intangible capital in post-communist transition leaders on their growth and structural change. We explain the reasons for limited contribution of this capital to growth of these countries and the differences between eastern European countries in this regard. We also recognize the meaning of the intangible capital for the middle income trap. We formulate policy actions that should be taken in order to reduce the gap between high and middle income economies.
Keywords: intangible capital, growth factors, growth convergence, middle income trap, structural change
JEL classification: E22, E61
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