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Institutions and the Productivity Challenge for European Regions

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  • Andres Rodriguez-Pose
  • Roberto Ganau

Abstract

Europe has witnessed a considerable labour productivity slowdown in recent decades. Many potential explanations have been proposed to address this productivity ‘puzzle’. However, how the quality of local institutions influences labour productivity has been overlooked by the literature. This paper addresses this gap by evaluating how institutional quality affects labour productivity growth and, particularly, its determinants at the regional level during the period 2003-2015. The results indicate that institutional quality influences regions’ labour productivity growth both directly —as improvements in institutional quality drive productivity growth— and indirectly —as the short- and long-run returns of human capital and innovation on labour productivity growth are affected by regional variations in institutional quality.

Suggested Citation

  • Andres Rodriguez-Pose & Roberto Ganau, 2021. "Institutions and the Productivity Challenge for European Regions," Papers in Evolutionary Economic Geography (PEEG) 2107, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Feb 2021.
  • Handle: RePEc:egu:wpaper:2107
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    Cited by:

    1. Diemer, Andreas & Iammarino, Simona & Rodríguez-Pose, Andrés & Storper, Michael, 2022. "The Regional Development Trap in Europe," CEPR Discussion Papers 17371, C.E.P.R. Discussion Papers.
    2. F. Aresu & E. Marrocu & R. Paci, 2022. "Public capital and institutions' quality in the Italian regions," Working Paper CRENoS 202202, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    3. Roberto Martino, 2021. "Public Investment, Convergence and Productivity Growth in European regions," Working Papers - Economics wp2021_19.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    4. Giulio Cainelli & Carlo Ciccarelli & Roberto Ganau, 2021. "Administrative reforms, urban hierarchy, and local population growth. Lessons from Italian unification," Papers in Evolutionary Economic Geography (PEEG) 2109, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Feb 2021.

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    More about this item

    Keywords

    Labour productivity; institutional quality; physical capital; human capital; innovation; regions; Europe;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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