13. Economic Capital

Produced fixed assets, such as buildings, machinery and infrastructure, play an important role in a country’s capacity to produce goods and services. In 2018, the OECD average of stock of produced fixed assets per person was close to USD 119 000 (Figure 13.2). The stock of produced fixed assets per capita is highest (over USD 189 000) in Norway, Luxembourg and Ireland, and lowest (below USD 76 000) in Poland, Chile, Israel, Lithuania and Greece. Between 2010 and 2018, the OECD average value of produced fixed assets increased by nearly 11%, cumulatively (up from around USD 107 000 per capita in 2010). The largest increases occurred in Ireland (up 78.6%), Chile (37.4%) and Lithuania (22.5%), with the largest falls in Greece (-12.0%), Portugal (-5.5%) and the Netherlands (-5.4%).

Knowledge capital can play an important role in productivity growth, and contribute to improvements in future quality of life, including through a more efficient use of resources than at present. In 2018, the OECD average stock of intellectual property assets was worth USD 5 556 per capita (Figure 13.3). Levels were highest in the United States, Sweden, Denmark, Norway and Japan (at over USD 10 000 per capita) and lowest in Mexico, Poland, Latvia and Greece (below USD 1 300 per capita, i.e. less than one-seventh that of the highest group). Between 2010 and 2018, the average stock of intellectual property assets across 31 OECD countries rose by 16.2% in real terms. It went up by more than 50% in Mexico, Lithuania, Estonia and Poland, but fell by 10% or more in Greece, Finland and the United Kingdom.

Gross fixed capital formation (GFCF) indicates the level of investment in produced fixed assets. In 2018, the annual growth of GFCF in OECD countries was 3.3%, on average (Figure 13.4). At the top end, countries such as Hungary, Latvia and Slovenia had annual growth rates of more than 10%, while in Ireland, Greece and Luxembourg, GFCF contracted (with rates of -21.1%, -12.2% and -2.7%, respectively). For OECD countries on average, GFCF has recovered from a state of zero growth in 2010, to an annual growth rate just above 3% in 2018. Nevertheless, growth rates are lower than in 2010 for around one-third of OECD countries. Particularly large falls have occurred in Turkey (-23.1 percentage points), Canada (-10.3) and Chile (-8.5).

Investment in research and development (R&D) is a key driver of changes in the stock of intellectual property assets. In 2018, the OECD average rate of investment in R&D was 2.5% of GDP (Figure 13.5), and around half of OECD countries have a rate below 2%. The highest rates were in Ireland (21.4%), Korea (4.2%), Japan (3.4%) and Sweden (3.0%), while the lowest rates (all below 1% of GDP) were in Lithuania, Latvia, the Slovak Republic, Luxembourg, Poland and Greece. Between 2010 and 2018, the rate of R&D investment increased by 0.6 percentage points or more in Ireland, Korea and Belgium, but fell by 0.3 percentage points or more in Finland, Sweden and Australia.

A country’s net financial position indicates both its exposure to overseas risk, and its stores of financial wealth and sources of future revenue. For the 35 OECD countries with available data, nearly two-thirds had a negative net worth in 2018 (Figure 13.6), meaning their stock of financial liabilities exceeded their financial claims on the rest of the world. Net debts were in excess of USD 30 000 per capita in Ireland, Greece, Portugal and Spain. By contrast, Norway had the highest net worth (just under USD 131 000 per capita), followed by Switzerland (just over USD 77 000). OECD countries’ net financial positions have diverged further since 2010, with large gains in several countries already enjoying a relatively high net worth, while net debts deepened at the tail end.

The financial net worth of general government can also imply risks to financial and economic sustainability. In 2018, across OECD countries, government financial liabilities exceeded financial assets to the tune of 27 percentage points of GDP (Figure 13.7). This share ranges from positive values in Norway (280.5%), Finland (52.7%) and Luxembourg (50.0%) to negative values in Greece (-142.6%), Japan (-123.7%), Italy (-120.3%), the United States (-112.7%) and Portugal (-104.4%). Between 2010 and 2018, the financial net worth of government fell by 4 percentage points for the average OECD country, and the gap between the top and bottom OECD countries widened further. The largest deteriorations occurred in those countries already well below the OECD average, including Greece (-49.8 percentage points), Spain (-40.0) and Portugal (-33.4). The largest improvements were in Norway (116.7 percentage points) and Switzerland (18.3).

High household debt can place a heavy burden on families, both financially and psychologically, and may pose risks for the wider economic system when defaults on repayments increase the instability of financial markets. In 2018, the OECD average household debt was 126% of household net disposable income (Figure 13.8). This ranged from below 50% in Hungary, Lithuania, Colombia and Latvia, to over 200% in Denmark, the Netherlands, Norway, Australia and Switzerland. Between 2010 and 2018, the OECD average household debt fell by roughly 3 percentage points (from 129% to 126%). However, this masks divergent patterns across countries: in Ireland, household debt fell by 75 percentage points, while falls or more than 35 percentage points occurred in Denmark, the Netherlands, Latvia and Hungary. By contrast, household debt levels increased by more than 25 percentage points in the Slovak Republic, Korea, Luxembourg, Australia and Norway.

High leverage of the banking sector (measured here by the ratio between its financial assets and its equities) can increase the financial system’s exposure to risk and cyclical downturns. In 2018, the OECD average banking sector leverage was about 16 (Figure 13.9), ranging from 28 or more in (in Japan, the United Kingdom, Italy and Greece), to 8 or less (in the United States, Australia, Chile, Hungary and Estonia). Since 2010, ratios have fallen in some of the countries that had among the highest leverage rates previously, including the United Kingdom, Slovak Republic and Norway, while the largest increases in leverage occurred in Turkey, Lithuania and Poland.


[2] Financial Stability Board and International Monetary Fund (2019), G20 Data Gaps Initiative (DGI-2): The Fourth Progress Report — Countdown to 2021, Financial Stability Board, Basel, http://fsb.org/2019/10/g20-data-gaps-initiative-dgi-2-the-fourth-progress-report-countdown-to-2021/.

[1] OECD (2013), How’s Life?: Measuring Well-being, OECD Publishing, Paris, https://doi.org/10.1787/9789264201392-en.

[3] Röhn, O. et al. (2015), “Economic resilience: A new set of vulnerability indicators for OECD countries”, OECD Economics Department Working Papers, No. 1249, OECD Publishing, Paris, https://doi.org/10.1787/5jrxhgjw54r8-en.

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