Is Innovation Increasing Capital Intensity in Europe?

Using data on 14 EU countries from 1980-2007, this paper measures the role inno-vation has had in increasing capital intensity in Europe. A supply side system of the normalised CES production function and its two first order conditions are used to esti-mate the parameters using NLSUR. The results show innovation has not been capital biased, instead it has mitigated the rise of capital intensity in the region and improved the share of labour in production.