Investment in intangible assets and economic complexity

Abstract

We study the nexus between a country's economic complexity and its investment level in intangible assets. Our data spans 27 countries, all sector classifications and 8 intangible categories, which allows us to consider over 188 indicators per country. Our approach offers a complementary more policy-oriented perspective, for economic complexity, compared to relatedness. Results underscore the significance of high knowledge intensity intangibles, such as research and development, in explaining economic complexity. Policy recommendations advocate for prioritizing R&D in manufacturing, alongside fostering complementary activities like employee training, design, and branding in the same sector. In the first part of our results, we introduce an intangible-complexity score for policymakers, enabling the assessment of a country's relative performance in ensuring complexity through investments in various forms of intangible capital, on a country basis. Our second set of estimates, which control for a vast set of potential confounders (almost 800), offer a precise measure of the average impact of intangible investments on complexity, and allow us to argue for the empirical superiority of recent advances in causal machine learning when modeling complexity.