Spatial productivity disparities in Great Britain

We study productivity disparities across metropolitan and non-metropolitan areas in Great Britain. Spatial disparities in productivity are large and persistent. Using a development accounting framework, we show that differences in area size and in the spatial distribution of human and business capital are key explanatory factors. A combination of area size and human capital explains 30 percent of the productivity variance, increasing to 43 to 57 percent once we add measures of business capital stocks. Applying our framework to a case study of Greater Manchester, we show that large increases in both types of capital are needed to narrow productivity disparities with London, illustrating the scale of the challenge for policies aimed at reducing spatial inequality.