Impacts of Intangible Assets on Regional Growth and Unemployment

The paper studies the impact of intangible assets on economic growth and unemployment from a regional perspective. The familiar relationship between changes in the unemployment rate and economic growth – known as Okun's law – is taken as a workhorse of the analysis and estimated for the 27 EU-member countries at the NUTS 1 level. The results establish Okun's law as a firm relationship to describe the growth-uemployment nexus. However, the analysis reveals substantial heterogeneities across the regions. In fact, the law is more inline with the regions of the old EU-member states. Similarly in Germany a significant East-Westdivide is observable. In addition there seems to be a separation between Northern and the Southern European regions. Therefore, the model is extended by including spatial effects to identify if there are significant spillovers, and whether they have changed over the integration process. Our findings confirm the hypothesis that spatial dependencies matter for the Okun relationship. The evidence is based on the spatial error and the spatial lag model although the former has a slightly better performance than the latter alternative. Due to the high regional aggregation level direct neighbourhood effects are dominant The importance of spatial effects has risen over time, i.e. the economic development has become more similar in the integration process. For less advanced regions regional economic growth and unemployment do not depend on intangible assets