What is a knowledge economy

Knowledge economy


The term “knowledge economy” describes an economic form and structure in which knowledge is the central resource. Even if knowledge has always been part of society and the economy, it is increasingly becoming a decisive location and production factor, while production locations are largely interchangeable around the world thanks to digital communication technology.


From production to knowledge work

The concept of the knowledge economy is closely linked to that of the “knowledge society”. The sociologist Daniel Bell used this to describe the structural change in society from an industrial to a post-industrial society. At the economic level, the change from a production to a service economy is taking place with increased involvement of knowledge work.

In the knowledge economy, physical performance is becoming increasingly less important, while cognitive skills are becoming more and more important. Knowledge is becoming a decisive production factor and a central key resource. What is meant, however, is not formal, accessible knowledge, but experience, judgment and self-organization. These skills are particularly pronounced among older employees. Longer life and work experience and pronounced communication skills enable older people to keep track of complex issues. They also know how to assess their own possibilities and limits more precisely and can use this as a basis to represent and appropriately implement decisions. A pronounced quality awareness and a high degree of reliability and independent, result-responsible commitment complement these characteristics.

Access, structuring and implementation of knowledge are decisive for success and failure in the knowledge economy. Surveys by the Fraunhofer Institute for Industrial Engineering and Organization revealed that the share of knowledge as a production factor in value creation is estimated at over 50 percent - and the trend is rising.

Here are a few facts from the Institut der deutschen Wirtschaft, which it published as part of a 2013 study. According to this, knowledge-intensive sectors have increased in importance in Germany, while labor-intensive sectors have lost their importance. In terms of value added, the knowledge-intensive industry has recorded the highest growth rates in recent years. The drivers in Germany were the motor vehicle industry, mechanical engineering and energy supply. The knowledge-intensive industries are also MINT-intensive industries, which is why the adequate supply of MINT skilled workers is of particular importance.

With regard to the share of employees and added value, the German economy is becoming tertiarized, according to the DIW. The value added share of the service industries increased again between 1995 and 2011 by a good one and a half percentage points. Today (2013) 68.3 percent of the value added is generated in the service sector. In 1995 it was only 66.6 percent.

The share of service occupations in Germany has risen from around 62 percent (1996) to a good 68 percent (2011). Such a trend can also be observed in the manufacturing sector, as more and more service activities are carried out here. According to the microcensus, the share of service activities in Germany has risen from 75.6 percent (1996) to 81.2 percent (2011). According to this, less than a fifth of the workforce is involved in production. Almost 71 percent of the gross value added was generated with service products in 2011. In 1995 this proportion was still 68.4 percent.

Knowledge-based indicators

In order to determine the degree of development of a knowledge economy, indicators are used, such as public and private spending on education, research and development, but also the school graduation rate, or the equipping of households with computers, which, as communication technology, enable easy access to knowledge.

According to the Federal Statistical Office, there were 247.4 billion in Germany in 2012

Euros spent on education, research and science. The total education budget was 177 billion euros, 79.5 billion euros were spent on research and development in companies and non-university research institutions, and another 5 was spent on the other educational and scientific infrastructure (e.g. museums, libraries), 1 billion euros. In 2012, 9.3 percent of the gross domestic product was spent on education, research and development, which corresponds to the 2011 figure.

In an international comparison, Germany still has room for improvement when it comes to spending on education, according to the OECD. Some key findings from the OECD for 2012:

Germany's system of early childhood education is quite well developed: 96 percent of 4-year-olds and 89 percent of 3-year-olds in Germany take part in early childhood education. Germany is thus well above the corresponding OECD average values ​​of 79 percent and 66 percent respectively.

The first-year and graduation rates in tertiary level A are on the rise in Germany, but are still lower than the OECD average. According to estimates, it is expected that 42 percent of young people in Germany will begin a course in tertiary level A during their lifetime (OECD average: 62 percent), and 30 percent will complete such a course (OECD average: 39 percent). In addition, an estimated 21 percent of young people in Germany are expected to start a course at tertiary level B (OECD average: 17 percent), and 14 percent are expected to complete such a course (OECD average: 10 percent).

20 percent of young adults in Germany achieve a higher level of education than their parents, significantly less than the OECD average (37 percent), 22 percent of young adults finish their education with a lower educational qualification than their parents, more than the OECD average ( 13 percent). 12.0 percent of 15 to 29-year-olds are neither in employment nor in education or training (Not in Education, Employment or Training - NEET), which means that the situation in Germany is better than the OECD average (15.8 percent ). Germany is one of the few countries where NEET rates fell or remained largely unchanged during the global recession, and it is the only country where unemployment rates have fallen for all educational levels.

Taking into account both public and private expenditure, Germany spends 5.3 percent of its GDP on education (all education sectors combined), which is an increase from the 2005 level (5.0 percent), but less than the OECD -Average (6.2 percent). The share of education expenditure in total public expenditure has also increased by 10.5 percent compared to 9.8 percent in 2005, but is below the OECD average (13.0 percent)

EU strategies

The so-called “Lisbon Strategy” sought to make the EU the most competitive and dynamic knowledge-based economic area in the world. This should be achieved on the basis of specific goals, for example by increasing annual research expenditure to at least three percent of gross domestic product (GDP). However, the EU average fell far short of this target. The share of annual research expenditure in 2013 was 2.1 percent of GDP on average in the EU. In view of various economic data, the goals are largely considered to have been missed.

In the successor strategy "Europe 2020", the Commission is pursuing the goals of making the EU a smarter and more ecological social market. The focus is still to generate added value through knowledge-based growth. This includes promoting research and development (R&D) as well as higher education and lifelong learning to increase economic growth. The goals to be achieved by 2020 include:

  • the increase in the employment rate of the population between 20 and 64 years from the current 69 percent to at least 75 percent,
  • increasing investment in R&D to at least 3 percent of gross domestic product, primarily by improving the conditions for R&D investment in the private sector,
  • reducing greenhouse gas emissions by 20 percent compared to 1990, increasing the share of renewable energies to 20 percent and increasing energy efficiency by 20 percent,
  • the reduction in the proportion of school dropouts from the current 15 percent to 10 percent and the increase in university graduates between the ages of 30 and 34 from the current 31 percent to at least 40 percent,
  • the reduction of the proportion of citizens below the respective national poverty line by 25 percent, whereby 20 million citizens should escape poverty.

Good practice

Knowledge Economy Indicators

The KEI (Knowledge Economy Indicators) project funded by the European Commission within the sixth framework program is part of a special program of policy-oriented research to integrate and strengthen the European research area (http://www.kei.publicstatistics.net). The project started in September 2004. It ended after a period of 38 months in November 2007. The aim of the project was to improve and further develop indicators for the knowledge economy. This also includes the analysis of the regional and supraregional informative value and the use of powerful composite indicators. The indicators of the knowledge society include, for example, “school graduation success rate”, “equipping households with computers” or “spending on research and development”. Such indicators play an important role in many policy decisions, such as: B. in financial support from the EU with a view to different economic and technical development standards within Europe or in the fulfillment of the Lisbon goals.

The research was carried out by six institutions: the University of Trier, the Eberhard Karls University of Tübingen, the Joint Research Center of the European Commission in Ispra (Italy), the Catholic University of Leuven (Belgium), the University of Maastricht (Netherlands) and the Statistical Office of Finland . The scientific management of the project was incumbent on Prof. Dr. Ralf Münnich (University of Trier).

As part of the project, the core aspects of the knowledge-based economy and the existing definitions were analyzed. In order to classify the total of 125 indicators from 30 European and six non-European countries, categories were delimited in relation to the Lisbon strategy. The data were inter alia. analyzed for possible gaps and deficiencies in order to improve the future understanding of the knowledge-based economy.

A second focus of the project was the development and analysis of composite indicators. For example, different aggregation and weighting approaches as well as presentation techniques examined in more detail. Simulation methods were also comprehensively analyzed in order to evaluate political scenarios with regard to their effects on indicator developments. These content-related and methodological aspects of the project were rounded off by the "quality analysis". Both the quality of the individual indicators used and the data on which they are based, as well as that of the composite indicator developed, were examined in more detail.


  1. OECD: More university graduates in Germany - but also increasing economic benefits from good education. [1]
  2. Bittlingmayer, Uwe H. (2006): “But you know that!” Comments on the knowledge economy. In the S.; Ullrich Bauer (ed.): The "knowledge society". Myth, ideology or reality. Wiesbaden: VS publishing house for social sciences
  3. Federal Statistical Office (2010): Education Financial Report 2010, Wiesbaden
  4. Federal Statistical Office (2010): Press release No. 441 of December 1, 2010: 2010 public education expenditure of over 100 billion euros is estimated [3]
  5. Cattell, R.B. (1963). Theory of fluid and crystallized intelligence: A critical experiment. In: Journal of Educational Psychology, 54, 1-22
  6. IW Consult GmbH: Industrial value creation as a hub of the economy, facts and arguments, module 4: Structural change in industry, Cologne 2013 [4]
  7. Bell, Daniel: The Post-Industrial Society, New York 1973
  8. Federal Statistical Office: education expenditure, budget for education, research
    and science 2011/12, Wiesbaden 2014 [5]
  9. OECD: Education at a Glance 2012: OECD Indicators 2012, Germany