The Impact of Intangible Assets on Regional Productivity Disparities in Great Britain

Abstract

During the past few years there has been a growing consensus in the literature that intangible assets represent a major source of productivity growth. Intangibles facilitate the accumulation of knowledge and information via learning and innovation, allowing, in this way, modern economies to improve the efficiency with which they utilise their resources. Nonetheless, despite the proliferation of studies that investigate the territorial impact of intangibles (variously defined), the full effect of these assets on regional productivity dynamics remains elusive. National Accounts still treat most of what can be considered intangibles as intermediate expenditure entailing that they are largely excluded from conventional measures of gross value added (GVA) and investment. The present paper attempts to tackle this shortcoming not only by including intangibles as capital in the aggregate production function, but also by employing GVA data that are adjusted for intangibles as output. The aim is to investigate the role of intangible assets on the evolution of regional productivity disparities in Great Britain during the period 1995–2004. The analysis considers the spatial effects of intangibles on both partial productivity measures and total factor productivity levels, while the regional figures are also scrutinised for the possible presence of σ-convergence and β-convergence trends during this time.