OECD Compendium of Productivity Indicators 2023

6. Investment

Context

Breaking down investment and capital by asset type helps to better understand the main drivers of GDP and productivity growth. For example, it allows assessing the state of infrastructure and the volume of investment in growth-enhancing technologies, such as ICT. Moreover, different asset types contribute in different ways to GDP and productivity growth. As explained in Chapter 3 Productivity and economic growth, capital services are the appropriate measure of capital input in productivity analysis and their measurement depends on the composition of the capital stock.

The diagramme below presents the minimum level of asset breakdown recommended by the 2008 System of National Accounts (2008 SNA). For the measurement of capital stocks and capital services, homogeneous asset groups with similar price deflators and depreciation patterns are required. One of the innovations introduced by the 2008 SNA was the enlargement of the asset boundary by capitalising expenditures in weapons systems and research and development (R&D), whereas they were previously considered as intermediate consumption. Nevertheless, important intangible assets such as brand equity, data, and organisational capital remain outside the national accounts’ asset boundary.

Depending on the purpose of the analysis, different assets can be grouped into different aggregate categories. For example, Dwellings, Other buildings and structures, Machinery and equipment and weapons systems, and Cultivated biological resources may be grouped into tangible assets, as opposed to intangible assets, also referred to as Intellectual Property Products (IPPs). A different classification often used in economic analysis distinguishes information and communication technology (ICT) and non-ICT assets. ICT assets include Computer hardware, Telecommunication equipment, and Computer software and databases, while non-ICT assets include Dwellings, Other buildings and structures, Transport equipment, Other machinery and equipment and weapons systems, Cultivated biological resources, and Intellectual property products except Computer software and databases.

Table 6.1. Breakdown of fixed capital assets according to the System of National Accounts 2008

	2008 SNA code	Produced fixed assets
Tangible assets	N111	Dwellings	Non-ICT assets
	N112	Other buildings and structures
	N11M	Machinery and equipment and weapons systems
	N1131	Transport equipment
	N1132	ICT equipment	ICT assets
	N11321	Computer hardware
	N11322	Telecommunications equipment
	N110	Other machinery and equipment and weapons systems	Non-ICT assets
	N115	Cultivated biological resources
Intangible assets	N117	Intellectual property products
	N1171	Research and development (R&D)
	N1172	Mineral exploration and evaluation
	N1173	Computer software and databases	ICT assets
	N1174	Entertainment, artistic and literary originals	Non-ICT assets
	N1179	Other intellectual property products

Source: OECD elaboration based on the 2008 System of National Accounts.

Key findings

• The investment rate (investment over GDP) fell in most countries in 2020 as compared with 2019. The largest declines were recorded in Chile, Colombia, Mexico, the Slovak Republic and South Africa, where the contraction of investment was much more pronounced than the contraction in GDP.

• However, the investment rate bounced back in most countries in 2021, reflecting the recovery of economic activity. The investment rate reverted to or exceeded its pre-pandemic level in 2021 in more than half of the countries covered in this chapter. The pace of recovery has been faster than in the aftermath of the financial crisis. Indeed, in many countries it took on average a decade for the investment rate to reach its pre-financial crisis level.

• Austria, Italy, Iceland and Slovenia saw the largest increases in the investment rate between 2020 and 2021. However, the investment rate continued to decline in 2021 in some countries, including the Czech Republic, Poland, Indonesia, and the Slovak Republic, where the rebound of investment was much more modest than the rebound in GDP.

• Lower investment in Other machinery and equipment and weapons systems and Transport equipment accounted for most of the fall in the investment rate at the onset of the COVID-19 crisis. The largest contractions of investment in these assets were observed in the Czech Republic, Mexico, the Slovak Republic and Switzerland. By contrast, investments in dwellings and Intellectual Property Products (IPPs) were more resilient, with only a marginal decline or even no decline in 2020 and 2021 in most countries. For IPPs, this is a continuation of a trend already observed in the decade before the pandemic. Note that the increasing share of dwellings in overall investment partly reflects the rapid increase in the prices of new dwellings in most countries during the pandemic.

Indicators

 

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How to read the indicators

While ICT assets are internationally traded and should be subject to similar price changes across countries, statistical agencies tend to use (very) different price indices to deflate nominal investment in ICT assets. In addition, they also assume different depreciation rates and service lives for these assets. For these reasons, the OECD estimates productive capital stocks and capital services using a set of harmonised ICT investment deflators as well as common depreciation rates and average service lives for all assets and countries (Schreyer, 2002).

The asset breakdown presented in figure 6.1 differs from the one recommended by the 2008 SNA for a few countries. In Korea, ICT equipment is included in Other machinery equipment and weapons systems. In Australia, ownership transfer costs are included in total GFCF but are not allocated across assets. Consequently, the sum of GFCF for individual assets is lower than total GFCF for this country. In Norway, total GFCF excludes investment in weapons systems. In Indonesia, Other buildings and structures are included in Dwellings. In Argentina, China, Colombia, India, Saudi Arabia and Türkiye, the classification of GFCF by type of asset is not available. Therefore, only total GFCF is presented. In Canada and the United States, total GFCF excludes GFCF in Cultivated biological resources.

For further methodological information, consult the OECD Productivity Statistics – Methodological notes at https://www.oecd.org/sdd/productivity-stats/OECD-Productivity-Statistics-Methodological-note.pdf.

Data sources

OECD National Accounts Statistics (database), http://dx.doi.org/10.1787/na-data-en.

OECD Productivity Statistics (database), http://dx.doi.org/10.1787/pdtvy-data-en.

References and further reading

OECD (2009), Handbook on Deriving Capital Measures of Intellectual Property Products, http://dx.doi.org/10.1787/9789264079205-en.

OECD (2009), Measuring Capital – OECD Manual, http://dx.doi.org/10.1787/9789264068476-en.

Schreyer, P. (2002), “Computer prices and international growth and productivity comparisons”, Review of Income and Wealth, Series 48, Number 1.