Economic Research as Driver of Knowledge and Data - High Impact Elements at NTTS 2017 Conference

1. "Economic Research as driver of knowledge and data – What elements create high impact? Satellite event "Challenges in measuring productivity, growth and intangibles" at the NTTS 2017 conference Brussels, 17. March 2017 M. Paasi, Unit B6 "Inclusive and open societies"

2. The objectives of this presentation • - an overview of the FP funded economic research on measuring productivity, growth and intangibles, together with global value chains – as they are presented today – and to make the links to official statistics • - the elements of high scientific, policy, European and statistical impact from these FP funded research projects; the statistical impact has been a non-recognised dimension of impact • - the mutual benefits in cooperating with economic research and official statistics in the context of European evidence based economic policy making

3. Framework programmes fund economic research that Europe needs FP7 the Social Sciences and Humanities research programme 1. Thematic focus on "Growth, employment and competitiveness" – Economic research was a new area in the FP Horizon 2020 Societal challenge 6 "Inclusive, innovative and reflective societies" • Include economic research on growth, employment or migration, cultural heritage including statistics (Call 2017) • Policy and challenge oriented research programmes take the European perspective and funding is competitive at the EU level – based on excellence in science

4. FP funded projects with high impact on science, European policy making and statistics Research on Productivity and growth: • EUKLEMSProductivity in the European Union: A Comparative Industry Approach (FP6) Research on Intangible capital: • COINVESTCompetitiveness, innovation and Intangible investment in Europe • INNODRIVEIntangible capital and innovations: drivers of growth and location in the EU • SPINTAN Smart Public Intangibles Research on global value chain in globally integrated economies: • WIOD World input-output tables

5. Elements for strong scientific, policy and statistical impact 1. Scientific progress in economics 2. Data creation model has a high statistical impact 3. Strong European policy impact: 1 + 2

6. 1. Scientific progress in economics • Traditional growth accounting: better measurement abouthow advanced, globally active economies grow (concepts and measurement) • Most recent developments in measurement concept of intangible capital, extending it to the public sector • Input-output and trade economics to assess global value creation (cross-border value chains) • The projects include the frontier economists of the fields: Carol Corrado; Bart van Ark; Marcel Timmer, Dale Jorgenson among others; together with great and motivated teams

7. 2. Strong impacts on data and statistics The research strategy of the projects include: • Firstly, comparative approach addressing the EU member countries is essential in the European policy making context • Secondly, missing data is created for own research purposes by respecting the methodologies and concepts of official statistics. Statistical competences are strongly included in the research throughout of the projects • Thirdly, the datasets of the projects are the IPR of the teams but they allow web-based assess to them – wide use worldwide • = creates a semi - SSH infrastructure for research and policy analysis

8. Aspects in the individual projectswhichallowcooperation and mutual benefitsbetweeneconomicresearch and officialstatistics

9. EUKLEMS "Productivity in the European Union: A Comparative Industry Approach" • Based on traditional growth accounting approach • Pioneer in bridging the economic research and statistical communities together: Analytical and statistical module • Using NA and NACE as basis which allow the uptake into regular statistical production once that time has come • Today, 6 EU Statistical offices produce EUKLEMS data on regular basis and there are international follow-ups (WORLDKLEMS – network) • Open access data base: www.euklems.net

10. FP7 research on Intangible assets Economics of Intangible assets is driven by the question whether we include all relevant investment (capital) in our growth and productivity analysis. The CHS “economic” view of investment is used: “any use of resources today designed to increase the productive capacity of the firm in the future is investment.” (Corrado, Hulten, and Sichel (2006).

11. FP funded projects address both business and public sector COINVEST "Competitiveness, innovation and Intangible investment in Europe" INNODRIVE "Intangible capital and innovations: drivers of growth and location in the EU" SPINTAN "Smart Public Intangibles

12. The open issue for economics and statistics: what are the relevant asset boundaries? • The R&D expenditure is "capitalised" in National Accounts since the new ESA 2010, i.e. treated as investment • What other assets should be included is under discussion: for many the R&D capitalisation is enough but the economic perspective may imply additional variables • The so-called "non-NA intangibles" in the projects are not in included in the National accounts presently but would classify from economic perspective (CHS – concept of investment) as capital

13. Shares of tangible and intangible assets in % of GDP across selected countries in 2013 (C.Jona-Lasinio)

14. Open access data based on harmonised COINVEST- and INNODRIVE – estimates • Voluntary cooperation between researchers from COINVEST, INNODRIVE and The Conference Board • => A harmonised data base on business sector intangibles is created: EC 2011, Joint Database on intangibles for European policymaking • www.intan-invest.net • open access joint data base covers most Member states and the USA and provides a research infrastructure for economics. • The macro database on intangibles in the business sector is up dated on voluntary basis

15. INNODRIVE project: firm level research and data • Intangibles, innovation and competitiveness of firms: structures of intangible capital differ across countries • Results for a number of countries: see INNODRIVE Policy Brief, February 2011 • Company level data from occupational data • www.innodrive.org

16. Business Sector Investment in intangibles as a share of (new) value added: Finland (Source: Innodrive Policy Brief 2011; Data available)

17. SPINTAN project "Intangibles in Public Sector" • SPINTAN addresses a politically important but an under-researched topic in economics: • - The main idea is that like in the business sector intangibles some public sector expenditures should be considered as investment: how to deal with public sector expenditure like research, education, culture, health…. • In practice, the SPINTAN extends the EUKLEMS market sector productivity matrix with the nonmarket sectors: provides us the total economy growth accounts.

18. Shares of market and non-market (public) intangibles in GDP, % in 2013 (C.Jona-Lasinio)

19. WIOD World input-output tables • Address the economic issue of cross-border value added creation in globally fragmented production activities and Competitiveness in Global Value chains • Trade flows exports and imports vs. input-output tables to track value added creation – countries compete in activities • linking with socio-economic and environmental dimensions • (Widely used) WIODWorld input-output database: www.wiod.org

20. Foreign share in final output value (B.Los)

21. Strong impact on policy, statistics and academic science Channels • Scientific quality: high number of academic publications • Policy users of the research and data (policy analysis): Commission, individual Governments, International organisations • Increased data availability provides the inputs to statistical work and data production – again: statistical quality of the data is a precondition

22. Great potential for cooperation in economic research and official statistics • Inputs from official statistics are clearly needed for comparative economic research in Europe – Eurostat with NSOs are the key • And vice versa, economic research can provide inputs to the official statistics, in particular new concepts and their measurement – key is: scientific quality and progress in economics • Strategic cooperation between economic research and official statistics in Europe creates huge mutual benefits - It requires courage and time to enter into a true dialogue between different communities

23. Data use is manifested in the policy analysis • The EUKLEMS data is used by DG ECFIN for the Annual Growth Survey which starts the European Semester cycle • A Box on Business sector intangibles (from INNODRIVE, COINVEST and INTAN database) in included in the ECFIN Winter forecast 2016 • EPC Note October 2016 "Investment in intangible assets" is based on the INTAN data and FP7 intangibles research on intangibles in the business sector and research (ECFIN and RTD) • EPC note, January 2017 "Investment environment for intangible assets" (collaboration with ECFIN and RTD)

24. International organizations and intangibles - examples • OECD publication 2013 "New sources of growth: Knowledge based capital" uses the INNODRIVE and COINVEST research and harmonised data • FP7 role mentioned conference "Growth, Innovation and Competitiveness: Maximizing the Benefits of Knowledge-Based Capital" in 2013

25. WIOD-INPUT OUTPUT RESEARCH AND DATA in policy documents • W.Chen/r.Gouma/M.P.Timmer 2017, The Share of Capital in Global Value Chains of Manufacturing Products, commissioned by WIPO 2017 • DG GROW 2016 The European construction value chain: performance, challenges and role in the GVC • DG GROW 2014 "Helping firms to grow - EUROPEAN COMPETITIVENESS REPORT 2014 • DG RTD, R&I Competitiveness report 2013 • DG Enterprise European Competitiveness Report 2012 Reaping the benefits of globalization