Production functions in the sector of knowledge intensive services

Abstract

The sector of knowledge intensive services is very often neglected, although it is very important for today's economy – it is highly innovative, fast-growing and usually provides highly paid and stimulating employment, involved in the creation and transfer of knowledge. It provides knowledge-intensive inputs to other entities in the private and public sectors. It deals with activities concerned primarily with human capital, thanks to the knowledge and skills of employees who are available to other companies. The aim of the article is to estimate the Cobb-Douglass production function for the knowledge intensive services sector and to compare it with the production function of the manufacturing sector which is one of the decisive sources of gross domestic product. Data for the period 1995-2018 in the annual frequency come from the database of the Czech Statistical Office. The output of the industry is measured as gross output at current prices, the amount of capital expressed by means of Gross fixed capital formation and work as employment in the sector. The change in capital per worker has the highest impact on output in the case of the manufacturing industry, which is dependent on physical capital. In the case of the fields of information and communication activities and professional, scientific and technical activities, the increase in the capital adequacy of work will be reflected in a lower increase in output per worker. These sectors are linked to human capital, so the non-inclusion of human capital in the production function leads to misleading results.

Keywords

• innovation
• human capital
• ; production functions
• employment
• manufacturing industry
• knowledge intensive services