Investments in Green Economy as a Potential Source of Value Added

The aim of this paper is to assess the possibilities of increasing domestic value added created by exports by investments in green economy. It can be argued that a large portion of „green economy“ is knowledge intensive with respect to regular sectors of economy, and if knowledge based economy (KBC) plays a significant role in determining the domestic value added created by exports, economies with a larger stock of KBC should have a larger difference in VAX between knowledge-intensive industries and less knowledge-intensive industries. In Croatia it has already been shown that sectors of economy with larger stock of intellectual capital measured by Intellectual Capital Efficiency (ICE) index attracted more FDI, which can also serve as a predictor for larger value added in exports due to higher productivity. Knowledge intensity of 18 industries in the US as the benchmark economy shows that „Electrical and optical equipment“ has above average knowledge intensity of 0,53, measured as share of labour compensation of personnel with tertiary education, just as financial intermediation any business services sectors (0,62), whereas construction (0,17), agriculture, hunting, forestry and fishing with (0,21) and basic metals and fabricated metal products (0,21) are under average sectors with respect to knowledge intensity. This is important, as in the developed economies only specific products, processes and functions that outperform emerging economies in Global Value Chains are able to profit from the larger share of value added, and in this respect Croatia with its stock of intellectual capital, higher wages (especially in workers with tertiary education) and should behave more like a developed than emerging economy. This hypothesis is tested on a sample of Croatian firms and sectors in different counties/regions, in order to assess the importance of knowledge based capital for their competitiveness and PROJECT MANAGEMENT 754 domestic value added embodied in exports, which can be provide by attracted FDI. As an extension, the potential role of financial development could be included, and the measure of the economy's financial development is the amount of credit by banks and other financial intermediaries to the private sector as a share of GDP.