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Productivity convergence and international openness

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  • Stephen Redding
  • James Proudman

Abstract

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.

Suggested Citation

  • Stephen Redding & James Proudman, 1998. "Productivity convergence and international openness," Bank of England working papers 77, Bank of England.
  • Handle: RePEc:boe:boeewp:77
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    File URL: http://www.bankofengland.co.uk/archive/Documents/historicpubs/workingpapers/1998/wp77.pdf
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    References listed on IDEAS

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    1. Bernard, Andrew B & Jones, Charles I, 1996. "Productivity across Industries and Countries: Time Series Theory and Evidence," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 135-146, February.
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    3. Coe, David T. & Helpman, Elhanan, 1995. "International R&D spillovers," European Economic Review, Elsevier, vol. 39(5), pages 859-887, May.
    4. Benhabib, Jess & Spiegel, Mark M., 1994. "The role of human capital in economic development evidence from aggregate cross-country data," Journal of Monetary Economics, Elsevier, vol. 34(2), pages 143-173, October.
    5. G Cameron, 1996. "Innovation and Economic Growth," CEP Discussion Papers dp0277, Centre for Economic Performance, LSE.
    6. Bernard, Andrew B & Jones, Charles I, 1996. "Comparing Apples to Oranges: Productivity Convergence and Measurement across Industries and Countries," American Economic Review, American Economic Association, vol. 86(5), pages 1216-1238, December.
    7. Gavin Cameron & James Proudman & Stephen Redding, 1997. "Deconstructing Growth in UK Manufacturing," Bank of England working papers 73, Bank of England.
    8. Dan Ben-David, 1993. "Equalizing Exchange: Trade Liberalization and Income Convergence," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 653-679.
    9. 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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    Citations

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    Cited by:

    1. Danny Quah, 2002. "Spatial Agglomeration Dynamics," American Economic Review, American Economic Association, vol. 92(2), pages 247-252, May.
    2. Griffith, Rachel & Redding, Stephen J. & Simpson, Helen, 2002. "Productivity Convergence and Foreign Ownership at the Establishment Level," CEPR Discussion Papers 3765, C.E.P.R. Discussion Papers.
    3. Jorge Saba Arbache, 2001. "Trade Liberalisation and Labor Markets in Developing Countries: Theory and Evidence," Studies in Economics 0112, School of Economics, University of Kent.
    4. Quah, Danny, 2002. "Technology Dissemination and Economic Growth: Some Lessons for the New Economy," CEPR Discussion Papers 3207, C.E.P.R. Discussion Papers.
    5. Rachel Griffith & Stephen Redding & John Van Reenen, 2001. "Measuring the cost-effectiveness of an R&D tax credit for the UK," Fiscal Studies, Institute for Fiscal Studies, vol. 22(3), pages 375-399, September.
    6. Fu, Miao & Fu, Xiaolan & Li, Tieli, 2008. "International and Intra-national Technology Spillovers and Technology Development Paths in Developing Countries: The Case of China," WIDER Working Paper Series 096, World Institute for Development Economic Research (UNU-WIDER).
    7. Rachel Griffith & Stephen Redding & Helen Simpson, 2004. "Foreign Ownership and Productivity: New Evidence from the Service Sector and the R&D Lab," Oxford Review of Economic Policy, Oxford University Press, vol. 20(3), pages 440-456, Autumn.
    8. Gavin Cameron & James Proudman & Stephen Redding, 1997. "Deconstructing Growth in UK Manufacturing," Bank of England working papers 73, Bank of England.
    9. Benjamin Nancy & Michael Ferrantino, 2001. "Trade Policy and Productivity Growth in OECD Manufacturing," International Economic Journal, Taylor & Francis Journals, vol. 15(4), pages 95-115.
    10. Rachel Griffith & Helen Simpson, 2004. "Characteristics of Foreign-Owned Firms in British Manufacturing," NBER Chapters,in: Seeking a Premier Economy: The Economic Effects of British Economic Reforms, 1980-2000, pages 147-180 National Bureau of Economic Research, Inc.
    11. Barbara Sianesi, 2002. "The returns to education: a review of the empirical macro-economic literature," IFS Working Papers W02/05, Institute for Fiscal Studies.
    12. Danny Quah, 2002. "Technology Dissemination and Economic Growth: Some Lessons for the New Economy," CEP Discussion Papers dp0522, Centre for Economic Performance, LSE.
    13. Hugo Erken & Piet Donselaar & Roy Thurik, 0000. "Total Factor Productivity and the Role of Entrepreneurship," Tinbergen Institute Discussion Papers 09-034/3, Tinbergen Institute.
    14. Óscar Afonso, 2001. "The Impact of International Trade on Economic Growth," FEP Working Papers 106, Universidade do Porto, Faculdade de Economia do Porto.
    15. Cameron, Gavin & Proudman, James & Redding, Stephen, 2005. "Technological convergence, R&D, trade and productivity growth," European Economic Review, Elsevier, vol. 49(3), pages 775-807, April.
    16. Elif Bascavusoglu-Moreau & Qian Cher Li, 2013. "Knowledge Spillovers & Sources of Knowledge in the Manufacturing Sector: Literature Review & Empirical Evidence for the UK," Working Papers wp451, Centre for Business Research, University of Cambridge.
    17. Barbara Sianesi & John Van Reenen, 2000. "The Returns to Education: A Review of the Macro-Economic Literature," CEE Discussion Papers 0006, Centre for the Economics of Education, LSE.
    18. 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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