Direct and indirect effects of universities on European regional productivity

Abstract

Universities are fundamental in driving economic performance as they generate human capital, research and knowledge diffusion. We propose a novel analysis by investigating their effects on European regions' total factor productivity (TFP) over the period 2000–2016. We distinguish between direct effects, due to universities societal role (“third mission”), and indirect ones originating from human and technological capital creation. Our contribution is threefold. First and foremost, we provide evidence that the presence of universities has a sizeable impact on regional TFP. Second, this impact spreads across regional boundaries. Third, universities effectively drive human and technological capital growth, thus indirectly fostering productivity enhancements.