Productivity convergence and international openness
There is a strong partial correlation between openness and rates of productivity growth across UK manufacturing sectors. The paper investigates the relationship more formally, within a theoretical model of productivity catch-up. The model identifies three potential effects of international openness: openness may affect (a) domestic rates of innovation, (b) the quantity of technological know-how that may be transferred from the frontier to the less advanced economy, (c) the rate at which this technology transfer occurs. From the theoretical framework, an econometric equation is derived which is used to estimate the relationship between UK productivity growth, the UK-US productivity gap and the degree of international openness. International openness is found, primarily, to affect the rate of productivity convergence, and this relationship is robust to the inclusion of information on R&D intensity, human capital, unionisation and capacity utilisation.
|Date of creation:||Mar 1998|
|Date of revision:|
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- Gavin Cameron & James Proudman & Stephen Redding, 1999. "Openness and its association with productivity growth in UK manufacturing industry," Bank of England working papers 104, Bank of England.
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