The quantitive impact of policies on regional innovation and development: The quantitive impact of policies on regional innovation and development MLP Workshop «Benchmarking for better regional innovation policies» Brussels, 25 November 2005 Christoph Koellreuter, Managing Director and Chief Economist, BAK Basel Economics Marc Bros de Puechredon, Head of Marketing & Communication, BAK Basel Economics


Slide2: Contents of the presentation: Facing globalisation: innovation friendly framework conditions at the regional level a must Political success factors of regional innovation and growth BAK research program: «Policies and Regional Economic Growth» BAK regional performance and policy variables databases BAK services


Slide3: 1. Facing globalisation: innovation friendly framework conditions at the regional level a must Continuous product and process innovation = the only successful way of high wage economies to meet the challenge of low cost competitors Innovation activity = takes place where there is a spatial concentration of companies of the same and related industries (clusters) High private productivity = i.e. internalisation of cluster specific externalities only if dividuals and companies are based in the region Conclusion: policies = have to focus on maintaining and / or improving innovation friendly framework conditions at the regional level Region = economic region in the sense of an innovation, labour market or functional urban region


Slide4: 2. Political success factors of regional innovation and growth Innovation resources - Expenditures on education, research and development - Incentives for researchers, professors, teachers and students to excel in research, teaching, learning and know-how transfer Incentives for entrepreneurs, managers and employees - Regulation of product and labour markets - Taxation of companies and highly qualified manpower Accessibility of regions Optimal decentralisation and spatial congruence of political and economic regions


Slide5: 3. BAK research program: «Policies and Regional Economic Growth» Objective: Quantitative assessment of the impact of policies on economic growth, productivity, employment and population growth at the regional level as an input into regional and national policy making Start: fall 2003 Major focus until fall 2005: modelling of productivity Research plan for 2006: modelling growth of employment, GDP and resident population Research guidance by BAK’s Scientific Advisory Board: - Prof. Dr. Paul Cheshire, London School of Economics - Prof. Dr. Juan Cuadrado-Roura, Universidad de Alcalá, Madrid - Prof. Dr. Bart van Ark, Groningen University, The Netherlands - Prof. Dr. Regina Riphahn, Universität Nürnberg-Erlangen, Germany - Prof. emeritus Dr. René Frey, University of Basel, Switzerland


Slide6: The quantitive impact of policy variables on regional economic growth: The BAK analytical concept


Slide7: BAK Research Program: Work done up to Fall 2005 Modelling of productivity growth as determined by - innovation resources: secondary and tertiary education, R&D - regulation of product and labour markets - taxation of companies and highly qualified manpower - global and continental (European) accessibility - industry structures, country effects Dataset used: Annual data 1980 up to 2003 for around 130 regions (NUTS 1/NUTS 2 levels) from the following countries: D, UK, A, CH, B, NL, LUX, S, DK, Finnland, N, Ireland, Northern Italy, Eastern/South Eastern France, Ile-de-France, Cataluña, Madrid Econometrics - panel data methods - statistical and economic testing - Granger causality - lag structures


Slide8: Preliminary research results Fall 2005: Impact of policy variables on productivity growth 1990-2003, cummulative, best vs. worst region


Slide9: BAK research programme 2005/2006 Model extension: Integration of the labour market (participation, population) Geographical extension: Additional regions, particularly US-American (all 50 federal states) Data extension: - Further innovation indicators - Quality of life indicators - Structure of government: indicators of political fragmentation and the degree of centralization / decentralization Industry specific analyses: Life sciences, financial centres, capital goods and tourism


Slide10: 4. BAK regional performance and policy variables databases Exclusive databases - Performance: more differentiated with respect to regions and regional industries as well as more up-to-date than official statistics (Switzerland: BAK Basel Economics is the only supplier of these data, no official source available) - Policy variables: generally in cooperation with renowned institutions in Europe - Very specific performance and policy variables databases for a limited set of technology and life sciences locations, financial centres and tourism destinations


Slide11: BAK Performance Database Regions Industries Variables of economic performance of national/ regional economies as well as the 60 industries Variables of the performance of the environment and society 400 regions in 18 EU-countries, Switzerland, Norway, United States and Japan at the NUTS 1 and 2 level; for the Extended European Alpine space (Southeast and Eastern France, Baden-Württemberg, Bavaria, Austria, Northern Italy and Switzerland) generally also at the NUTS 3 level; 2006: inclusion of the 50 States of the USA 60 industries in the above mentioned 400 regions Gross value added at current, constant prices as well as industry specific purchasing power parities, employment, hours worked, output per man hour, labour cost and unit labour cost for regions in the Extended Alpine Space as a part of project MARS «Monitoring the Alpine Regions’ Sustainability» led by the Lead Partner BAK Basel Economics in the framework of the Interreg IIIB programme Alpine Space of the European Commission


Slide12: BAK Policy Variables Database Policy area «INNOVATION»: Education, science and technology policy Indicators: Innovation resources: - Expenditure on research and development as percent of regional GDP - Sum of scores of Shanghai Index of the research quality of the 500 best universities in the world - Part of employment with tertiary education (total and by industry) - Part of employment with secondary education (total and by industry) Innovation processes: - Patents (total and by industry) - Bibliometric indicators (total and by research field) - Company start-ups (total and by industry) Coverage (fall 2005): 140 regions in 21 countries Partner institute: ISI Fraunhofer Institut, Karlsruhe


Slide13: BAK Policy Variables Database Policy area «TAXATION»: Fiscal and social policy Indicators: Tax burden of companies and highly qualified manpower Coverage (fall 2005): 65 regions in 21 countries Partner institute: ZEW Center for European Economic Research, Mannheim Policy area «REGULATIONS»: Regulatory policies Indicators: OECD Regulation Indices for product and labour markets; backward and forward extrapolation with the CATO Indices for Economic Freedom Coverage (fall 2005): 21 countries Policy area «ACCESSIBILITY»: Transport and infrastructure policy Indicators: Indicators of global and continental (European) accessibility Coverage (fall 2005): 250 regions in 21 countries Partner Institute: IVT Institute for Transport Planning and Systems of ETH Federal Polytechnical Institute, Zürich


Slide14: 5. BAK Services Access to the exclusive performance and policy variables databases of BAK Basel Economics Annual Forum in June: Presentation of seminal papers relating to issues of regional competitiveness based on the most recent research of BAK Basel Economics; in depth discussion in workshops with representatives of national governments and businesses Elaboration and presentation of focused reports ordered by interested regions


Slide15: 5. BAK Services Used by whom? - Representatives of public bodies at the national, regional, sub regional level as well as industry associations, companies and other parties interested in influencing policy decisions at the regional and national level - Last but not least: citizens of regions and countries Used for what? - SWOT analyses - Elaboration and evaluation of regional visions and strategies - Introduction of more objectivity into the discussion of location and competitiveness related issues - As an input into lobbying of the region at the upper level government WHAT GETS MEASURED GETS DONE !