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Regional Patterns of Intangible Capital, Agglomeration Effects and Localised Spillovers in Germany

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Kurt Geppert, Anne Neumann

Vaasa: Innodrive, 2010, 26 S.
(Innodrive Working Paper Series ; 9)


We use a large micro-dataset to assess the importance of intangible capital - organisation, R&D and ICT capital - for the economic performance of establishments and regions in Germany. In 2003 self-produced intangible capital accounted for one fifth of the total capital stock of establishments with more than 10 employees. More than half of the intangible capital is R&D capital. This high proportion is mainly due to a relatively strong and research-intensive manufacturing sector in Germany. At the regional level, we find descriptive evidence for a close relationship between intangible capital and the economic performance of regions. This is true both for the level of economic activities and for growth. In a sequence of annual cross-sectional regressions for the years from 1999 to 2003 we try to assess the effects of intangible capital on the productivity (the average wage level) of establishments, controlling for other establishment characteristics and the regional economic environment. Doubling the intangible capital intensity of establishments increases the average wage levels by one percent. Regarding the regional economic environment, we find that the substantial net advantages of agglomeration for establishments have more to do with broad knowledge and diversity than with regional clustering and specialisation. Separate regressions for the wage levels of non-intangible workers show very similar results. These workers can share the rents of the activities of intangible workers. Thus, intangible capital generates positive externalities not only at the regional level, but also at the level of establishments.