Public infrastructure, private capital and the performance of manufactures: short and long run effects

Despite the general idea among economists that public capital is a necessary but not sufficient condition for regional economic development, there is not consensus on the quantification of its effect. It is our belief that the variety of results on infrastructure impact in the economic literature is due to the fact that it depends on a series of factors. Among them we can think of a different sectoral effect, the level of economic development in the area, so as the amount of the existing public capital stocks and their interaction with infrastructures in other regions. In this paper we focus on this latter condition, having into account that the evidence on public capital spillovers obtained in other studies is not homogeneous. This way, whereas in Holtz-Eakin and Schwartz (1995) the stock of highways in a state does not suppose benefits in productivity further its borders, Mas et al. (1997) obtain that the infrastructural endowment in the neighbours can be important. Using different functional forms, the first purpose of this paper is to shed light into the existence of public capital spillovers considering not only the physical interaction among regions but also other forms of relationship such as trade linkages. In a second step, we follow a discusion on the existence of other economic externalities that in case of not being considered could be the reason why we obtain biased estimations for regional returns to scale. Both purposes are treated through the use of spatial econometrics techniques in the Spanish regional case. Keywords: Public capital, Infrastructure Spillovers, External Effects, Spatial Econometrics

SPATIAL MOBILITY AND LOCATION CHOICES OF HIGHLY SKILLED WORKERS

The aim of the present paper is to shed light on the determinants of geographical mobility and location choices of skilled individuals across the European regions. The most talented workers, e.g. inventors, move for a number of reasons, contributing in this manner to the geographical diffusion of knowledge as well as to reshape the geography of talent. Thus, geographic areas constitute nodes through which talent circulate, bringing knowledge from one place to another. By means of a gravity model, we will test whether social proximity between inventors’ communities and the so-called National System of Innovation drive in- and out-flows of inventors between pairs of regions, above and beyond physical separation, as well as other pulling factors (amenities, economic conditions, and the like). As for the econometrics is concerned, in order to accommodate our estimations to the count nature of our dependent variable and the high number of zeros in it, zero inflated negative binomial models are used. Our first results point out to the importance of, still, geographical proximity in driving this phenomenon. However, social relationships, as well as institutional, or technological and cultural proximities, are also playing a preponderant role in mediating the mobility patterns of inventors across the European geography.

Research Networks and Inventors’ Mobility as Drivers of Innovation: Evidence from Europe

We investigate the importance of the labour mobility of inventors, as well as the scale, extent and density of their collaborative research networks, for regional innovation outcomes. To do so, we apply a knowledge production function framework at the regional level and include inventors’ networks and their labour mobility as regressors. Our empirical approach takes full account of spatial interactions by estimating a spatial lag model together, where necessary, with a spatial error model. In addition, standard errors are calculated using spatial heteroskedasticity and autocorrelation consistent estimators to ensure their robustness in the presence of spatial error autocorrelation and heteroskedasticity of unknown form. Our results point to the existence of a robust positive correlation between intra-regional labour mobility and regional innovation, whilst the relationship with networks is less clear. However, networking across regions positively correlates with a region’s innovation intensity.Speed Limits; inventors’ mobility, networks of co-inventors, knowledge production function, spatial econometrics, European regions

EVIDENCE ON THE ROLE OF OWNERSHIP STRUCTURE ON FIRMS’ INNOVATIVE PERFORMANCE

Based on the Knowledge Production Function framework given by Griliches (1979), we slightly modify it so that the innovative output depends upon a set of factors related to the firm internal characteristics and are influenced by the environment. Specifically, regarding the firm internal determinants the effect of the concentration of the ownership, the composition of the boards of directors and the effect of the nature of the ownership (foreign and public) are analyzed. Additionally, in order to capture the determinants of the environment in which the firm operates other variables concerning the internationalization of market, the agglomeration economies and the regional knowledge externalities are also considered. In order to assess the impact of these determinants on the number of patents and models of use awarded by the firm, the discreteness of the latter variable has to be taken into account. We apply Poisson and Negative Binomial models for a more comprehensive evaluation of the hypothesis in a panel of Spanish manufacturing firms. The results show patenting activity is positively favoured by being located in an environment with a high innovative activity, due to the existence of knowledge spillovers and agglomeration economies.Knowledge production function, patents, R&D, ownership, regions

DOES HUMAN CAPITAL STIMULATE INVESTMENT IN PHYSICAL CAPITAL? EVIDENCE FROM A COST SYSTEM FRAMEWORK

The direct effect of human capital on economic growth has been widely analysed in the economic literature. This paper, however, focuses on its indirect effect as a stimulus for private investment in physical capital. The methodological framework used is the duality theory, estimating a cost system aggregated with human capital. Empirical evidence is given for Spain for the period 1980-2000. We provide evidence on the indirect effect of human capital in making private capital investment more attractive. Among the main explanations for this process, we observe that higher worker skill levels enable higher returns to be extracted from investment in physical capital.

Regional returns to physical capital: are they conditioned by educational attainment?

This paper provides novel empirical evidence of the indirect effect of educational attainment on regional economic growth, through its influence on the profitability of investment in physical capital. We test the hypothesis that the regional heterogeneity of the return to physical capital can be directly related to the existing heterogeneity in the educational attainment of workers. The results for the Spanish case support our hypothesis that the higher the educational attainment of workers the greater the returns on investment in physical capital. In fact, this effect seems to be sufficiently strong to have counterbalanced the traditional mechanism of decreasing returns to capital accumulation.returns to capital, human capital, productivity, cost system

FIRM COMPETITIVE STRATEGIES AND THE LIKELIHOOD OF SURVIVAL - THE SPANISH CASE

This paper, based on the ideas of Jovanovic’s theory (1982), analyses the impact of the main strategies determining the competitive behaviour of firms on their survival rate. We consider those strategies related both to product and price differentiation. Among the former ones, one may think of the specific differentiation due to advertisement and patent expenses or the technological differentiation based on R&D expenses or new production processes. Among the strategies of the second group, some are based on capital accumulation, or advantages of fixed costs such as scale economies or absolute cost advantages thanks to production techniques introduced by experience of by process innovations. The use of these strategies in a set of Spanish manufacturing firms (1990-2001) is analyzed. Firstly, several non-parametric tests for equality of survival functions are computed to check the diversity of survival rates across different competitive characteristics of firms. Secondly, a duration model based on a hazard rate model is estimated to study the impact of the main competitive strategies on firm survival. We find that several aspects on the competitive advantage of the firms play an important role in the likelihood of firm survival. Finally, we also conclude that there exists a different competitive strategy having into account two different size groups of firms.

Human capital and regional economic growth - Evidence from the dual approach

Theoretical contributions to the literature have stressed the role of human capital in promoting economic growth. However, the empirical exercises have provided mixed evidence on the real effect of such type of capital. Most of the evidence has been obtained by estimating growth equations or production functions using samples of (heterogeneous) countries. In this paper, we report empirical evidence on the effects of human capital in the sample of Spanish regions. As they are supposed to be more homogeneous economies from an institutional, social and economic perspective, we assume that the evidence provide in this paper is a more robust measure of the real effects of human capital in stimulating the take off of lagging economies. We departure from the traditional empirical approach as our estimates come from the dual framework. This easily allows us to get not only the aggregate return to human capital, but also some other important measures such as its shadow price, that is the willingness to pay for an extra year of education of firm’s employees, and the degree of complementariety/substitutability with other types of capital. Results suggest that human capital has exerted a significant effect in the Spanish regions, which is stronger in the less developed ones. It not only have a direct effect but an indirect one by compensating the mechanism of decreasing returns to physical capital. Important conclusions for the assessment and design of regional development policies can be derived from such results.

Fiscal policy and interest rates: the role of financial and economic integration.

It is commonly believed that a fiscal expansion raises interest rates. However, these crowding out effects of deficits have been found to be small or non-existent. One explanation is that financial integration offsets interest rate differentials on globalised bond markets. This paper measures the degree of integration of government bond markets, using spatial modelling techniques to take this spillover on financial markets into account. Our main finding is that the crowding out effect on domestic interest rates is significant, but is reduced by spillover across borders. This spillover is important in major crises or in periods of coordinated policy actions. This result is generally robust to various measures of cross-country linkages. We find spillover to be much stronger among EU countries.fiscal policy, spillover, interest rates, crowding out, spatial models.

Spatial spillovers and innovation activity in European regions

This paper explores the spatial distribution of innovative activity and the role of technological spillovers in the process of knowledge creation across 138 regions of 17 countries in Europe (the 15 members of the European Union plus Switzerland and Norway). The analysis is based on an original statistical databank set up by CRENoS on regional patenting at the European Patent Office spanning from 1978 to 1997 and classified by ISIC sectors (3 digit). In a first step, a deep exploratory spatial data analysis of the dissemination of innovative activity in Europe is performed. Some global and local indicators for spatial association are presented, summarising the presence of a dependence process in the distribution of innovative activity for different periods and sectors. Secondly, we attempt to model the behaviour of innovative activity at the regional level on the basis of a knowledge production function. Econometric results points to the relevance of internal factors (R&D expenditure, economic performance, agglomeration economies). Moreover, the production of knowledge by European regions seems to be also affected by spatial spillovers due to innovative activity performed in other regions. Keywords: Innovative activity, Spatial analysis, European regions, Knowledge production function.