Global Economy Watch

PwC's Macroeconomics team presents Global Economy Watch, a short publication that looks at the trends and issues that are affecting the global economy and details our latest economic projections for the world's leading economies.

Northern Europe and East Asia are the global hotspots for idea creation

At the simplest level, it is ideas that power the global economy. Ideas can lead to the creation of businesses which generate innovative products and services to sell. The best ones can strengthen competition, increase productivity and ultimately, raise living standards. In this edition of Global Economy Watch we outline the results of analysis into the most idea intensive economies in the world.

Although our research shows that South Koreans are granted more patents per million people than anywhere else, our headline finding was that idea intensity is concentrated in two geographical regions: Northern Europe and East Asia. These regions appear to have outperformed their peers by focusing on a small number of sectors, within which they have been granted an abundance of patents. Our main recommendation for governments elsewhere is to consider the proportion of research and development relative to GDP.

We found a strong positive correlation between idea generation and combined public and private spending on R&D. Firms continue to produce a wealth of ideas, and in our top performers, governments offer incentives to help them develop their ideas into revenue-generating reality.

Our second article looks at intergenerational inequality in the G7. Across the economic groups, the youngest cohort of workers in the study – those born between 1980 and 1984 – have seen their income grow the slowest in the past 15 years. This is most likely because their careers were the least established when the global financial crisis hit in 2008.

Lastly, we consider the significant fall in bond yields so far in 2019. Investors’ desire for safe-haven assets has pushed yields down far further than economic fundamentals might suggest. Seen from another angle, however, low (or negative) yields offer governments an enticing opportunity to borrow extremely cheaply to finance some expensive but growth-generating opportunities, such as improving infrastructure.

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Director Jonathan Gillham explains which countries in the world are particularly strong at generating new ideas and how other economies can become more innovative.

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Barret Kupelian

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