Total Factor Regional Productivity in Greece

The components of productivity change in manufacturing industry over the regions of Greece in the 1980s are examined. Regional differences in productivity are significant in two respects. They reflect the outcomes of different production processes in space where labour is supplied and combined with various sorts of capital and where specific technologies are used. They also reflect opportunities for developing efficient business operations in space, in that they indicate one important aspect of a region's comparative advantage. Change in value added in manufacturing is represented by change in the factor inputs of capital, labour, and technology. Some of this change in output is accounted for by constant returns to scale. The rest is a result of variable returns to scale, such as produced by agglomeration economies or diseconomies, different levels of infrastructure provision, etc, and technological change. Total factor productivity represents these sources of nonconstant returns to scale. It is shown that for Greece the largest gains in total factor productivity are to be found in the noncentral regions, and especially in those having industrial area projects and industrial grants and incentives. These results are in line with research undertaken in other contexts. Those areas with the most significant productivity gains from the deployment of new technology tend to be the well-established centres housing medium-sized populations. There is some evidence to suggest that new employment opportunities are associated with increases in total factor productivity, although rarely with advances in the use of new technology.