Intangible capital, comparative advantage, and trade patterns: An empirical analysis

Intangible capital plays a pivotal role in shaping the trajectories of modern economies, particularly through its impact on growth, trade patterns, and structural transformations. This study is the first to treat intangible capital as a source of comparative advantage in determining a country’s international trade patterns, in the spirit of the Heckscher–Ohlin–Vanek (HOV) model. Applying the gravity model approach to a dataset of 21 OECD countries, the results reveal that countries relatively abundant in intangible capital tend to export more from sectors that make intensive use of such capital. Additionally, we find high-skilled labour has a similar impact, underscoring the importance of human capital in managing the complexity of modern production processes. Government policies should focus on intangible capital investments, alongside tangible capital, including provision of digital infrastructure, as well as training of high-skilled labour, in order to foster the expansion of intangible capital and increase countries’ engagement in new patterns of trade, such as service trade.