Endogenous intangible resources and their place in the institutional hierarchy

© 2015, Springer-Verlag Berlin Heidelberg. This paper seeks to find evidence for the impact of local culture on the share of intangible investments and the results for productivity per worker in the EU15 countries at the NUTS2 level during the period 2000–2008. The main scope of the paper is to explore the nature and consequences of intangible resources and their hierarchical relationship with culture, thus seeking to identify the genuine endogenous sources of local productivity beyond the standard Romer-type of models. In our study we use basic economic and social indicators from two main sources: the EUROSTAT Regional Database and the European Social Survey (ESS). Regression analysis, based on a pooled cross-section and on a balanced panel through a generalized method of moments (GMM) approach, shows evidence in support of: (i) the classical Tiebout hypothesis on cultural dependence of local public goods in the case of three different types of intangible investments: education, health care, and research and development; (ii) the impact of intangible investments on local productivity which confirms their treatment as investments rather than their usual treatment as a spending category in the national accounts. Clearly, the data set used has its limitations, but what remains most noticeable is the added value of the methodologically alternative measures of local culture employed in our analysis, i.e. a novel cultural attitudes Herfindahl Index, a cultural attitudes Segregation Index, and a CBD (Culture-Based Development) two-vector approach (living culture and cultural heritage). The results generated depict a confirmative picture of the hierarchical relationship between intangible investments, culture and productivity at the regional scale in Europe