“What Affects the Main Engine of Growth in the European Economy? Industrial Interconnectedness and Differences in Performance of Business Services Across the EU-25”

In their recent publication entitled "What Affects the Main Engine of Growth in the European Economy? Industrial Interconnectedness and Differences in Performance of Business Services Across the EU-25”,  Maciej Sobolewski and Grzegorz Poniatowski examine the role of business services in enhancing economic growth across the EU Member States. With nearly one-third of total growth in the EU generated by this sector, it is the “largest contributor to total value added growth in the decade preceding 2005”, even though not all the Member States participate equally in the process of value added creation. As the study shows, a staggering 92% of total value added is generated by the Old Member States. Surprisingly, however, the forces behind the growth of business services prove to be the same across the entire EU, in spite of disparities between states in terms of their strength.
Econometric analysis of available data allowed the authors to identify two main transmission channels through which the service industry contributes to economic growth, namely increasing labour productivity, integration and interconnectedness of services with downstream industries. At the same time, the authors stress the fact that, as significant as physical capital is for economic growth, nowadays it is losing its importance in favour of intangible capital. Hence, in their opinion, in order to ensure continuous economic growth, investment in human capital and intangible assets should be increased.