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A diverse community of
leading experts, policymakers
and practitioners

The Institute’s key research themes
are led by ten academic partners
spread across the UK.

We’re a UK-wide research
organisation exploring what
productivity means for business

Businesses are crucial to solving
the UK’s productivity problems.


The Effects of Capital Flows, Capital Prices and Capital Shocks on Productivity in UK and European Cities and Regions

The aim of this project is to uncover the role that capital shocks and investment allocation processes play in shaping local and regional productivity responses. The research examines how the links between the macroeconomic and national governance features of a country and the internal economic geography of a country shape the productivity-driving role of cities and regions.

The project builds on the approach pioneered by Daams et al. (2020) which is based on the integration and analysis of investment-grade real estate capital inflows spanning all sectors into cities and regions across the UK and Europe. The importance of real estate capital flows is that they signal local capital market conditions and pathways. Real estate capital flows are both location-specific and they also represent large-scale and long-term investments into a locality which bundle together the capital from many different stakeholders and institutions, and in turn act as a key conduit for leveraging additional investment flows for other business investment purposes, especially SME finance.

The analysis contributes to the understanding of the links between macroeconomic transmission mechanisms and regional productivity responses, as mediated via capital markets because of differences between places as well as between investment climates prior to and after the 2007-08 global financial crisis. The research integrates OECD-standardised national, regional and city data on productivity growth, and monetary and fiscal policy outcomes, with region and city data on a whole range of productivity and productivity-related features. This then exploits the enormous heterogeneity of European nations, region and cities so as to identify which national, regional, or city-specific features either mediate, ameliorate or exacerbate the productivity-related implications of national monetary shocks.

Project lead Michiel Daams (University of Groningen)