Papers in Evolutionary Economic Geography

October 20, 2015

# 15.34 Causal Relations between Knowledge-Intensive Business Services and Regional Employment Growth

Filed under: 2015 — Tags: , , , , — mattehartog @ 5:58 pm

Thomas Brenner, Marco Capasso, Matthias Duschl, Koen Frenken, Tania Treibich

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This paper studies the causal relations between regional employment growth in Knowledge-Intensive Business Services (KIBS) and overall regional employment growth using German labour-market data for the period 1999-2012. Adopting a recently developed technique, we are able to estimate a structural vector autoregressive model in which the causal directions between KIBS and other sectors are examined including various time lags. One main finding holds that although regional growth has a negative short-term effect on KIBS, KIBS growth has a long-term positive effect on the whole regional economy. This result confirms the claim that KIBS can play a key role in regional policies. Distinguishing between financial and non-financial KIBS, we find that financial KIBS have a procyclical effect on regional growth underlining the potential de-stabilizing effect of a large financial sector.

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