Full Breakdown
Discrepancies in Intangible Capital Investment: A Comparative Analysis of France and Germany
10/6/2025, 8:02:26 AM
Core Event: Measurement Issues in Intangible Capital Investment
The productivity gap between Europe and the United States has been widening, with investment in intangible capital and new technologies, particularly artificial intelligence, seen as crucial for future productivity growth. France and Germany, despite their similar economic profiles, exhibit significant differences in intangible capital investment, raising questions about the accuracy of measurement practices in both countries.
Investment Trends in Intangible Capital
Recent analysis using data from the EUKLEMS/INTANProd database reveals that France has consistently outperformed Germany in intangible capital investment, allocating 16% of its gross value added compared to Germany's 10.7% from 1995 to 2021. This disparity is particularly pronounced in software investment, where France invested 3.2 times more than Germany (2.4% versus 0.7%) and in organizational capital, where the ratio is 2.6 times (5.3% versus 2.0%). Despite these differences, labor productivity growth trends in both countries have remained broadly similar, suggesting that the discrepancies in investment levels may not be solely attributable to efficiency differences.
Measurement Challenges
The contrasting investment figures can be partly explained by differing measurement practices employed by France's INSEE and Germany's Destatis. For instance, France reported €32.3 billion in software investment in 2019, while Germany reported only €11.5 billion in 2016. These figures highlight the challenges in measuring purchased software investments, with Germany acknowledging difficulties in capturing accurate data. Furthermore, the estimation of organizational capital is influenced by the reported share of managers in the workforce, which is significantly higher in France (21.7%) than in Germany (5%).
Implications for GDP and Economic Policy
The measurement discrepancies have direct implications for GDP calculations and economic policy. Correcting the mismeasured software investments could lead to an upward revision of Germany's GDP figures, which are currently low. The need for harmonization in measuring intangible capital across countries is critical for accurately assessing its impact on productivity and ensuring reliable economic statistics.
Criticism & Opposition
Critics argue that the current measurement practices fail to capture the true economic contributions of intangible investments. The lack of standardization in accounting practices between France and Germany raises concerns about the reliability of official statistics, potentially misleading policymakers and stakeholders regarding the economic health of both nations.
Official Statements & Responses
The authors of the analysis emphasize the necessity for harmonizing measurement practices to improve the accuracy of economic data. They advocate for revisiting accounting practices at both firm and national levels to ensure that intangible investments are adequately reflected in GDP calculations and economic assessments.
Verbatim Quotes
- “More immediately, correcting mismeasured software investment could imply a revision of current and past GDP figures.” — Nonnis et al., 2025
- “These gaps are unlikely to reflect actual differences in business and organisational models but rather point to a lack of harmonisation in the International Standard Classification of Occupations (ISCO) between the two countries.” — Nonnis et al., 2024
- “Accurate and comparable data are essential not only for understanding the true impact of intangible investment on productivity growth, but also to ensure the correct measurement of aggregate economic statistics.” — Nonnis et al., 2025
Conclusion: The Path Forward
The analysis underscores the urgent need for improved measurement practices of intangible capital in France and Germany. By addressing these discrepancies, both countries can better understand their economic landscapes and enhance their competitiveness in the global market.
