The impact of intangible The impact of intangible assets on regional assets on regional

productivity disparities in productivity disparities in Great BritainGreat Britain

Konstantinos Melachroinos & Nigel Konstantinos Melachroinos & Nigel SpenceSpence

School of GeographySchool of Geography

Queen Mary, University of LondonQueen Mary, University of London

Intangibles: a catalyst for Intangibles: a catalyst for economic growtheconomic growth

• A wide range of assets: software, databases, A wide range of assets: software, databases, innovation property, market research, innovation property, market research, reputation, human and organisational capital, reputation, human and organisational capital, etc.etc.

• Facilitate the accumulation of knowledge and Facilitate the accumulation of knowledge and informationinformation

• Allow economies to become more efficient in the Allow economies to become more efficient in the way that they utilise resources, create more way that they utilise resources, create more value and thus become more competitivevalue and thus become more competitive

The treatment of intangibles The treatment of intangibles within the National (and within the National (and Regional) Accounts FrameworkRegional) Accounts Framework• They are considered intermediate expenditure They are considered intermediate expenditure

that is completely used up during the that is completely used up during the production processproduction process

• They are not counted as a production factorThey are not counted as a production factor

• They are not counted as Gross Value AddedThey are not counted as Gross Value Added

The consequences for regional The consequences for regional productivity analysisproductivity analysis

• Conventional measures of output Conventional measures of output underestimate the actual amount of Gross underestimate the actual amount of Gross Value AddedValue Added

• Partial productivity measures (e.g. labour Partial productivity measures (e.g. labour productivity) are likely to be underestimatedproductivity) are likely to be underestimated

• Intangibles contribution to TFP levels either is Intangibles contribution to TFP levels either is omitted and/or allocated to other factors (fixed omitted and/or allocated to other factors (fixed capital and labour)capital and labour)

Objectives of this research:Objectives of this research:

• to investigate the role of intangible assets in to investigate the role of intangible assets in the evolution of regional productivity disparities the evolution of regional productivity disparities in Great Britain during the period 1995-2004in Great Britain during the period 1995-2004

• Partial productivity indicators (e.g. labour Partial productivity indicators (e.g. labour productivity) and TFP levels are estimatedproductivity) and TFP levels are estimated

• The possible presence of The possible presence of σ-convergence and β-σ-convergence and β-convergence trends is also exploredconvergence trends is also explored

Incorporating intangible capital Incorporating intangible capital into the neo-classical modelinto the neo-classical model

• Assuming that intangibles are intermediate Assuming that intangibles are intermediate expenditure the standard neo-classical expenditure the standard neo-classical production function assumes that:production function assumes that:

• (1)(1) Y = A LY = A Lαα K Kββ

• where Y, L and K denote value-added, labour and fixed where Y, L and K denote value-added, labour and fixed capital respectively, capital respectively, α α is the value share of labour in is the value share of labour in value added, value added, ββ is the value share of fixed capital in is the value share of fixed capital in value-added (value-added (β = 1- α)β = 1- α) and A is a Hicks neutral and A is a Hicks neutral productivity termproductivity term

Incorporating intangible capital Incorporating intangible capital into the neo-classical modelinto the neo-classical model

• The TFP levels in any given year t can be The TFP levels in any given year t can be calculated by rearranging and taking the calculated by rearranging and taking the natural logarithms of the previous equationnatural logarithms of the previous equation

• (2)(2) lnAlnAtt = a ln(Y = a ln(Ytt/L/Ltt) + β ln(Y) + β ln(Ytt/K/Ktt))

• TFP is decomposed into labour productivity and TFP is decomposed into labour productivity and fixed capital productivity weighted by the fixed capital productivity weighted by the shares of labour and fixed capital in value-shares of labour and fixed capital in value-addedadded

Incorporating intangible capital Incorporating intangible capital into the neo-classical modelinto the neo-classical model• Assuming that intangibles are investment the Assuming that intangibles are investment the

neo-classical production function is written:neo-classical production function is written:

• (3)(3) Y' = A' LY' = A' La'a' K Kβ'β' R Rγγ

• where Y', A', L, K and R represent value-added, where Y', A', L, K and R represent value-added, TFP, labour, fixed capital and intangible capital TFP, labour, fixed capital and intangible capital respectively, while a', ß' and γ are the value respectively, while a', ß' and γ are the value shares of labour, fixed capital and intangibles shares of labour, fixed capital and intangibles in value-added (a' + β' + γ = 1)in value-added (a' + β' + γ = 1)

Incorporating intangible capital Incorporating intangible capital into the neo-classical modelinto the neo-classical model

• The TFP levels in any given year t can be The TFP levels in any given year t can be calculated as follows:calculated as follows:

• (4)(4) lnA’lnA’tt = a’ ln(Y’ = a’ ln(Y’tt/L/Ltt) + β’ ln(Y’) + β’ ln(Y’tt/K/Ktt) + ) + γ γ ln(Y’ln(Y’tt/R/Rtt) )

• TFP is now decomposed into labour productivity, TFP is now decomposed into labour productivity, fixed capital productivity and intangible capital fixed capital productivity and intangible capital productivity weighted by the shares of labour, productivity weighted by the shares of labour, fixed capital and intangibles in value-addedfixed capital and intangibles in value-added

Incorporating intangible capital Incorporating intangible capital into the neo-classical modelinto the neo-classical model

• The extension of the model requires some The extension of the model requires some important adjustments:important adjustments:

• Value-added needs adjustment (Y'>Y)Value-added needs adjustment (Y'>Y)

• The shares of labour (a') and fixed capital The shares of labour (a') and fixed capital (ß') also change(ß') also change

• TFP (A') is different to TFP (A) TFP (A') is different to TFP (A)

Incorporating intangible capital Incorporating intangible capital into the neo-classical modelinto the neo-classical model

• In order to investigate the effects of In order to investigate the effects of intangible assets on productivity levels the intangible assets on productivity levels the results of two TFP analyses (including and results of two TFP analyses (including and excluding intangibles) are comparedexcluding intangibles) are compared

• This is because not only GVA but also This is because not only GVA but also every production factor in the right hand-every production factor in the right hand-side of the equations is affected by the side of the equations is affected by the incorporation of intangibles into the neo-incorporation of intangibles into the neo-classical modelclassical model

Spatial coverage:Spatial coverage:

• the current Government Office Regions the current Government Office Regions (GORs) excluding Northern Ireland(GORs) excluding Northern Ireland

• The regions of East, London and the South The regions of East, London and the South East had to be aggregated (ELSE) to East had to be aggregated (ELSE) to accommodate boundary changesaccommodate boundary changes

Regional investment on Regional investment on intangible assets and intangible assets and intangibles stockintangibles stock• The regional investment on intangible assets The regional investment on intangible assets

have been produced by allocating to regions have been produced by allocating to regions the intangible investment series constructed the intangible investment series constructed by Marrano et al (2009) for the UKby Marrano et al (2009) for the UK

• Five main categories of intangibles: Five main categories of intangibles: computerised information, scientific R&D, computerised information, scientific R&D, non-scientific R&D, brand equity and firm non-scientific R&D, brand equity and firm specific resourcesspecific resources

Regional investment on Regional investment on intangible assets and intangible assets and intangibles stockintangibles stock• Since intangibles are produced by skilled Since intangibles are produced by skilled

labour their spatial allocation should follow labour their spatial allocation should follow closely the regional distribution of skilled closely the regional distribution of skilled labour performing these activitieslabour performing these activities

• Estimates of regional intangibles Estimates of regional intangibles investments were developed by using investments were developed by using regional shares to the total national regional shares to the total national employment in intangible producing employment in intangible producing sectors (4-digit SIC) as weightssectors (4-digit SIC) as weights

Regional investment on Regional investment on intangible assets and intangible assets and intangibles stockintangibles stock• The annual investment data were deflated The annual investment data were deflated

by using a gross value-added deflatorby using a gross value-added deflator

The net stock Rt for any category of intangibleassets and in any given year is given by thefollowing formula:

(5) Rt = I t + (1-δ R)Rt-1

where I t is the investment in intangibles assetsin year t and δR is the annual depreciation rate.

Gross value-addedGross value-added

• Estimates of workplace based GVA at current Estimates of workplace based GVA at current basic prices (million GBP) that allocate basic prices (million GBP) that allocate incomes to the region in which commuters incomes to the region in which commuters workwork

• The data were deflated by using a gross The data were deflated by using a gross value-added deflatorvalue-added deflator

• For the TFP calculations that include For the TFP calculations that include intangibles the output variable was adjusted intangibles the output variable was adjusted by incorporating the annual regional by incorporating the annual regional investment in intangible assets to the GVA investment in intangible assets to the GVA figuresfigures

Regional fixed capital stockRegional fixed capital stock

• Regional estimates are based on Regional estimates are based on Eurostat's annual series of net total stocks Eurostat's annual series of net total stocks of fixed assets for the entire United of fixed assets for the entire United KingdomKingdom

• The national net total stocks of fixed The national net total stocks of fixed assets were allocated to regions according assets were allocated to regions according to regional shares of total fixed capital to regional shares of total fixed capital investmentinvestment

LabourLabour

• The annual labour input is measured as The annual labour input is measured as total hours worked during any given yeartotal hours worked during any given year

• employment x weekly hours x 52employment x weekly hours x 52

• Employment and hours worked data come Employment and hours worked data come from ONS surveysfrom ONS surveys

Regional labour productivityRegional labour productivityF i g u r e 1

L a b o u r P r o d u c t i v i t y i n N a t u r a l L o g s( G r o s s V a l u e A d d e d n o n - a d j u s t e d f o r i n t a n g i b l e s )

2 . 8 0

2 . 8 5

2 . 9 0

2 . 9 5

3 . 0 0

3 . 0 5

3 . 1 0

3 . 1 5

3 . 2 0

1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4

N o r t h E a s t

N o r t h W e s t

Y o r k s h i r e a n d t h e H u m b e r

E a s t M i d l a n d s

W e s t M i d l a n d s

E a s t / L o n d o n / S o u t h E a s t

S o u t h W e s t

W a l e s

S c o t l a n d

G r e a t B r i t a i n

L a b o u r P r o d u c t i v i t y i n N a t u r a l L o g s( G r o s s V a l u e A d d e d a d j u s t e d f o r i n t a n g i b l e s )

2 . 9 0

3 . 0 0

3 . 1 0

3 . 2 0

3 . 3 0

3 . 4 0

1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4

N o r t h E a s t

N o r t h W e s t

Y o r k s h i r e a n d t h e H u m b e r

E a s t M i d l a n d s

W e s t M i d l a n d s

E a s t / L o n d o n / S o u t h E a s t

S o u t h W e s t

W a l e s

S c o t l a n d

G r e a t B r i t a i n

Regional fixed capital Regional fixed capital productivityproductivity

F i g u r e 2

F i x e d C a p i t a l P r o d u c t i v i t y i n N a t u r a l L o g s( G r o s s V a l u e A d d e d n o n - a d j u s t e d f o r i n t a n g i b l e s )

- 1 . 8 0

- 1 . 6 0

- 1 . 4 0

- 1 . 2 0

- 1 . 0 0

- 0 . 8 0

- 0 . 6 0

- 0 . 4 0

1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4

N o r t h E a s t

N o r t h W e s t

Y o r k s h i r e a n d t h e H u m b e r

E a s t M i d l a n d s

W e s t M i d l a n d s

E a s t / L o n d o n / S o u t h E a s t

S o u t h W e s t

W a l e s

S c o t l a n d

G r e a t B r i t a i n

F i x e d C a p i t a l P r o d u c t i v i t y i n N a t u r a l L o g s( G r o s s V a l u e A d d e d a d j u s t e d f o r i n t a n g i b l e s )

- 1 . 7 0

- 1 . 5 0

- 1 . 3 0

- 1 . 1 0

- 0 . 9 0

- 0 . 7 0

- 0 . 5 0

- 0 . 3 0

1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4

N o r t h E a s t

N o r t h W e s t

Y o r k s h i r e a n d t h e H u m b e r

E a s t M i d l a n d s

W e s t M i d l a n d s

E a s t / L o n d o n / S o u t h E a s t

S o u t h W e s t

W a l e s

S c o t l a n d

G r e a t B r i t a i n

Regional intangible capital Regional intangible capital productivityproductivity

Figure 3

Intangibles Productivity in Natural Logs(Gross Value Added adjusted for intangibles)

0.60

0.80

1.00

1.20

1.40

1.60

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

North East

North West

Yorkshire and the Humber

East Midlands

West Midlands

East/London/South East

South West

Wales

Scotland

Great Britain

Regional TFPRegional TFPF i g u r e 4

T o t a l F a c t o r P r o d u c t i v i t y i n N a t u r a l L o g s( G r o s s V a l u e A d d e d n o n - a d j u s t e d f o r i n t a n g i b l e s )

1 . 1 0

1 . 2 0

1 . 3 0

1 . 4 0

1 . 5 0

1 . 6 0

1 . 7 0

1 . 8 0

1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4

N o r t h E a s t

N o r t h W e s t

Y o r k s h i r e a n d t h e H u m b e r

E a s t M i d l a n d s

W e s t M i d l a n d s

E a s t / L o n d o n / S o u t h E a s t

S o u t h W e s t

W a l e s

S c o t l a n d

G r e a t B r i t a i n

T o t a l F a c t o r P r o d u c t i v i t y i n N a t u r a l L o g s( G r o s s V a l u e A d d e d a d j u s t e d f o r i n t a n g i b l e s )

1 . 2 0

1 . 3 0

1 . 4 0

1 . 5 0

1 . 6 0

1 . 7 0

1 . 8 0

1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4

N o r t h E a s t

N o r t h W e s t

Y o r k s h i r e a n d t h e H u m b e r

E a s t M i d l a n d s

W e s t M id l a n d s

E a s t / L o n d o n / S o u t h E a s t

S o u t h W e s t

W a l e s

S c o t l a n d

G r e a t B r i t a i n

Table 1 Decomposition of TFP into labour, fixed capital and intangible capitalproductivity levels in 1995 (natural logarithms)(a) Excluding intangibles

Labour Productivitya Fixed CapitalProductivityb

TFP

North East 1.81 -0.64 1.17North West 1.80 -0.44 1.35Yorkshire & Humber 1.78 -0.45 1.32East Midlands 1.79 -0.39 1.40West Midlands 1.77 -0.42 1.34East/London/South East (ELSE) 1.88 -0.24 1.64South West 1.81 -0.27 1.54Wales 1.80 -0.53 1.27Scotland 1.82 -0.38 1.44

Great Britain 1.83 -0.37 1.46

CV 0.02 -0.27 0.10

(b) Including intangiblesLabour Productivitya Fixed Capital

ProductivitybIntangible Capital

ProductivitycTFP

North East 1.62 -0.54 0.16 1.25North West 1.63 -0.35 0.15 1.43Yorkshire & Humber 1.60 -0.37 0.18 1.42East Midlands 1.62 -0.31 0.16 1.48West Midlands 1.59 -0.34 0.17 1.43East/London/South East (ELSE) 1.73 -0.16 0.12 1.68South West 1.63 -0.21 0.17 1.59Wales 1.61 -0.44 0.20 1.37Scotland 1.65 -0.30 0.15 1.50

Great Britain 1.66 -0.29 0.14 1.52

CV 0.02 -0.32 0.13 0.08Note: Detail may not add to total due to rounding.a Weighted by labour's share of value-added.b Weighted by fixed capital's share of value-added.c Weighted by intangible capital's share of value-added.

Table 2 Decomposition of TFP into labour, fixed capital and intangible capitalproductivity levels in 2004 (natural logarithms)(a) Excluding intangibles

Labour Productivitya Fixed CapitalProductivityb

TFP

North East 1.83 -0.57 1.27North West 1.81 -0.41 1.41Yorkshire & Humber 1.81 -0.39 1.42East Midlands 1.86 -0.36 1.51West Midlands 1.84 -0.39 1.45East/London/South East (ELSE) 1.96 -0.25 1.71South West 1.87 -0.29 1.58Wales 1.82 -0.47 1.36Scotland 1.85 -0.41 1.44

Great Britain 1.89 -0.35 1.54

CV 0.02 -0.22 0.08

(b) Including intangiblesLabour Productivitya Fixed Capital

ProductivitybIntangible Capital

ProductivitycTFP

North East 1.68 -0.45 0.12 1.35North West 1.65 -0.31 0.13 1.47Yorkshire & Humber 1.64 -0.31 0.15 1.48East Midlands 1.69 -0.27 0.14 1.56West Midlands 1.67 -0.30 0.13 1.51East/London/South East (ELSE) 1.81 -0.17 0.09 1.73South West 1.70 -0.21 0.14 1.63Wales 1.64 -0.38 0.17 1.43Scotland 1.68 -0.31 0.12 1.49

Great Britain 1.73 -0.26 0.11 1.58

CV 0.03 -0.26 0.16 0.07Note: Detail may not add to total due to rounding.a Weighted by labour's share of value-added.b Weighted by fixed capital's share of value-added.c Weighted by intangible capital's share of value-added.

Table 3: Productivity growth rates (average annual percentage growth), 1995-2004(a) Excluding intangibles

Labour Productivity Fixed CapitalProductivity

TFP

North East 0.47% 2.23% 1.13%North West 0.30% 1.09% 0.60%Yorkshire & Humber 0.69% 1.73% 1.08%East Midlands 1.25% 1.14% 1.21%West Midlands 1.29% 1.05% 1.20%East/London/South East (ELSE) 1.46% -0.34% 0.78%South West 0.98% -0.39% 0.47%Wales 0.36% 1.91% 0.94%Scotland 0.44% -0.89% -0.06%

Great Britain 1.05% 0.77% 0.95%

(b) Including intangiblesLabour Productivity Fixed Capital

ProductivityIntangible Capital

ProductivityTFP

North East 1.11% 2.87% -3.54% 1.10%North West 0.52% 1.31% -2.26% 0.43%Yorkshire & Humber 0.91% 1.95% -3.00% 0.76%East Midlands 1.34% 1.23% -1.96% 0.89%West Midlands 1.63% 1.39% -3.77% 0.88%East/London/South East (ELSE) 1.65% -0.15% -2.62% 0.52%South West 1.38% 0.01% -2.90% 0.39%Wales 0.58% 2.13% -2.90% 0.65%Scotland 0.73% -0.60% -3.14% -0.19%

Great Britain 1.31% 1.03% -2.83% 0.70%Note: The partial productivity measure growth rates are not weighted by the production factors’ share tovalue-added. Thus TFP growth rates do not equate with the sum of the partial productivity measures’growth rates.

Table 4 Sigma convergence indicators of natural logs of productivity measuresa) Results excluding intangibles

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004Labour productivityCV 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.02Standard Deviation 0.05 0.05 0.05 0.06 0.06 0.05 0.06 0.07 0.07 0.07

Capital productivityCV -0.27 -0.28 -0.26 -0.26 -0.25 -0.22 -0.22 -0.22 -0.23 -0.22Standard Deviation 0.31 0.31 0.29 0.28 0.27 0.24 0.24 0.23 0.25 0.23

TFPCV 0.10 0.10 0.09 0.10 0.09 0.08 0.08 0.09 0.09 0.08Standard Deviation 0.13 0.14 0.13 0.13 0.13 0.12 0.12 0.12 0.13 0.12

b) Results including intangibles1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Labour productivityCV 0.02 0.02 0.02 0.02 0.02 0.02 0.02 0.03 0.03 0.03Standard Deviation 0.07 0.07 0.07 0.07 0.07 0.07 0.07 0.08 0.09 0.09

Capital ProductivityCV -0.32 -0.32 -0.31 -0.30 -0.29 -0.26 -0.26 -0.26 -0.27 -0.26Standard Deviation 0.32 0.32 0.30 0.29 0.28 0.25 0.25 0.24 0.25 0.24

Intangibles productivityCV 0.13 0.14 0.14 0.14 0.14 0.14 0.14 0.15 0.15 0.16Standard Deviation 0.17 0.18 0.17 0.17 0.16 0.16 0.15 0.16 0.16 0.17

TFPCV 0.08 0.08 0.08 0.08 0.08 0.07 0.07 0.07 0.07 0.07Standard Deviation 0.12 0.12 0.11 0.12 0.12 0.10 0.11 0.11 0.11 0.11

Table 5 Beta convergence regressions results (a) Regression results excluding intangibles β SE t λ Adjusted R2 Labour productivity 1995-2000 -0.0127 0.0376 -0.34 0.0131 -0.12 2000-2004 0.0666* 0.0334 1.99 -0.0608 0.27 1995-2004 0.0203 0.0310 0.65 -0.0188 -0.08 Fixed capital productivity 1995-2000 -0.0455*** 0.0106 -4.29 0.0503 0.68 2000-2004 -0.0089* 0.0047 -1.90 0.0091 0.25 1995-2004 -0.0289*** 0.0069 -4.17 0.0329 0.67 TFP 1995-2000 -0.0272* 0.0132 -2.06 0.0289 0.29 2000-2004 0.0064 0.0111 0.58 -0.0064 -0.09 1995-2004 -0.0135 0.0100 -1.35 0.0143 0.09 b) Regression results including intangibles β SE t λ Adjusted R2 Labour productivity 1995-2000 0.0020 0.0236 0.09 -0.0020 -0.14 2000-2004 0.0463* 0.0244 1.90 -0.0434 0.34 1995-2004 0.0193 0.0217 0.89 -0.0179 -0.03 Fixed capital productivity 1995-2000 -0.0452*** 0.0093 -4.87 0.0500 0.74 2000-2004 -0.0120* 0.0051 -2.35 0.0122 0.36 1995-2004 -0.0297*** 0.0061 -4.85 0.0340 0.74 Intangibles productivity 1995-2000 -0.0206 0.0152 -1.35 0.0215 0.09 2000-2004 0.0027 0.0301 0.09 -0.0026 -0.14 1995-2004 -0.0073 0.0115 -0.63 0.0075 -0.08 TFP 1995-2000 -0.0253* 0.0112 -2.27 0.0267 0.34 2000-2004 -0.0008 0.0132 -0.06 0.0008 -0.14 1995-2004 -0.0155 0.0098 -1.58 0.0166 0.16 * Statistically significant at 10% level ** Statistically significant at 5% level *** Statistically significant at 1% level

Regional labour productivityRegional labour productivity

• Labour productivity is generally increasing Labour productivity is generally increasing everywhereeverywhere

• It varies relatively little over the British It varies relatively little over the British regions and shows little signs of regions and shows little signs of convergenceconvergence

• ELSE leads Great Britain in terms of labour ELSE leads Great Britain in terms of labour productivity levelsproductivity levels

Regional fixed capital Regional fixed capital productivityproductivity

• Fixed capital productivity is not markedly Fixed capital productivity is not markedly increasing except in the North East and increasing except in the North East and WalesWales

• It exhibitsIt exhibits wide regional variation and clear wide regional variation and clear convergence trendsconvergence trends

• ELSE again leads Great Britain in terms of ELSE again leads Great Britain in terms of fixed capital productivity levelsfixed capital productivity levels

Regional intangible capital Regional intangible capital productivityproductivity

• Intangible capital productivity is declining Intangible capital productivity is declining everywhereeverywhere

• There is some regional variation and some There is some regional variation and some hints of convergencehints of convergence

• Surprisingly ELSE lags in relation to other Surprisingly ELSE lags in relation to other British regionsBritish regions

Regional TFPRegional TFP

• TFP is generally increasing everywhereTFP is generally increasing everywhere

• There is some regional variation and some There is some regional variation and some signs of convergencesigns of convergence

• ELSE once more leads Great Britain in ELSE once more leads Great Britain in terms of TFP levelsterms of TFP levels

The intangibles’ effectThe intangibles’ effect

• Intangibles do raise labour and fixed capital Intangibles do raise labour and fixed capital productivity as well as TFP levelsproductivity as well as TFP levels

• Intangibles increase the growth rates of Intangibles increase the growth rates of labour and fixed capital productivity but labour and fixed capital productivity but reduce the growth rates of TFPreduce the growth rates of TFP

• Intangibles do not exacerbate regional Intangibles do not exacerbate regional productivity inequalitiesproductivity inequalities

The intangibles’ effectThe intangibles’ effect

• Convergence tendencies (or lack of them Convergence tendencies (or lack of them except for capital productivity) remain except for capital productivity) remain unaltered in the presence of intangiblesunaltered in the presence of intangibles

• The surprising finding is that the The surprising finding is that the intangibles' effect is important but favours intangibles' effect is important but favours no one region substantially more than any no one region substantially more than any otherother