Regional productivity differences in the European Union - Theoretical predictions and empirical evidence
The analysis of regional income and productivity differences in the European Union (EU) has some tradition. The theoretical framework of most empirical studies on these subjects is the neoclassical growth model. Thus, research has focussed on convergence of income and productivity among EU regions. While spatial clustering is an issue in a number of studies, geography is rarely taken into account. This paper takes an explicitly spatial perspective, so we are able to look at an alternative theoretical approach, the New Economic Geography (NEG). Our regional classification is a modified version of the NUTS2 level. We use the degree of agglomeration and the geographical location (core vs. periphery) as geographical indicators. This allows for the empirical evaluation of some of the ideas of NEG regarding the pattern and development of regional productivity differences of EU regions. The analysis covers the period from 1982 to 2000. We develop a two-stage estimation strategy. Using panel data analysis in the first stage we estimate region-specific effects on productivity and its dynamics in terms of production and employment growth. In the second stage we apply Analysis of Covariance in order to explain those region-specific effects through other time-invariant factors and to estimate the impact of these factors on productivity. Our results indicate a strong significance of region-specific factors for productivity differences in the EU. The geographical indicators are significant but their impact appears to be rather limited. While the estimated parameters of the categorial spatial variables are consistent with predictions of the NEG, unobserved heterogenity at the national level is much more important. State-specific effects can explain a major part of variation in regional productivity. This implies that the regional pattern of productivity in the EU still is largely determined by national "productivity regimes". Regarding the productivity dynamics in the EU, we find a tendency towards convergence. This is in line with most other empirical studies on this subject. However the decrease of regional productivity differences is the result of two opposite processes: There is convergence of production but divergence of employment. Again national factors appear to dominate. We find that the dynamics of regional development in terms of output and employment growth are strongly determined by state-specific effects and these effects are varying significantly over time. A tentative interpretation of our results is that the economic development of regions within the EU can not be easily explained by either neoclassical theory or NEG. The reduction in regional productivity differences appears to be formed to a large extent by factors at the national level. Examples are the downsizing of low productivity agriculture in southern european countries or the boost in part-time employment in the Netherlands during the eighties. Further empirical research will have to establish whether the national component in regional development is attenuating and a European pattern of productivty growth is emerging.
|Date of creation:||Aug 2003|
|Date of revision:|
|Contact details of provider:|| Postal: Welthandelsplatz 1, 1020 Vienna, Austria|
Web page: http://www.ersa.org
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Krugman, Paul, 1991.
"Increasing Returns and Economic Geography,"
Journal of Political Economy,
University of Chicago Press, vol. 99(3), pages 483-99, June.
- Puga, Diego, 1999.
"The rise and fall of regional inequalities,"
European Economic Review,
Elsevier, vol. 43(2), pages 303-334, February.
- Diego Puga, 1996. "The Rise and Fall of Regional Inequalities," CEP Discussion Papers dp0314, Centre for Economic Performance, LSE.
- Diego Puga, 1996. "The rise and fall of regional inequalities," LSE Research Online Documents on Economics 20643, London School of Economics and Political Science, LSE Library.
- Puga, Diego, 1997. "The Rise and Fall of Regional Inequalities," CEPR Discussion Papers 1575, C.E.P.R. Discussion Papers.
- Paul M Romer, 1999.
"Endogenous Technological Change,"
Levine's Working Paper Archive
2135, David K. Levine.
- Xavier Sala-i-Martin, 1994.
"Regional cohesion: Evidence and theories of regional growth and convergence,"
Economics Working Papers
104, Department of Economics and Business, Universitat Pompeu Fabra.
- Sala-i-Martin, Xavier X., 1996. "Regional cohesion: Evidence and theories of regional growth and convergence," European Economic Review, Elsevier, vol. 40(6), pages 1325-1352, June.
- Sala-i-Martin, Xavier, 1994. "Regional Cohesion: Evidence and Theories of Regional Growth and Convergence," CEPR Discussion Papers 1075, C.E.P.R. Discussion Papers.
- Ron Martin, 2000.
"Emu Versus The Regions? Regional Convergence And Divergence In Euroland,"
ESRC Centre for Business Research - Working Papers
wp179, ESRC Centre for Business Research.
- Ron Martin, 2001. "EMU versus the regions? Regional convergence and divergence in Euroland," Journal of Economic Geography, Oxford University Press, vol. 1(1), pages 51-80, January.
- Forslid, Rikard & Haaland, Jan I. & Ulltveit-Moe, Karen-Helene, 1999.
"A U-Shaped Europe? A Simulation Study of Industrial Location,"
CEPR Discussion Papers
2247, C.E.P.R. Discussion Papers.
- Forslid, Rikard & Haaland, Jan I. & Midelfart Knarvik, Karen Helene, 2002. "A U-shaped Europe?: A simulation study of industrial location," Journal of International Economics, Elsevier, vol. 57(2), pages 273-297, August.
- Forslid, R. & Haaland, J.I. & Knarvik, K.H.M., 1999. "A U-Shaped Europe? A Simulation Study of Industrial Location," Papers 19/99, Norwegian School of Economics and Business Administration-.
- Quah, Danny T., 1996. "Regional convergence clusters across Europe," European Economic Review, Elsevier, vol. 40(3-5), pages 951-958, April.
- Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
- Damien NEVEN & Claudine GOUYETTE, 1993.
"Regional Convergence in the European Comunity,"
Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP)
9311, Université de Lausanne, Faculté des HEC, DEEP.
- Rodríguez-Pose, Andrés & Fratesi, Ugo, 2002. "Unbalanced development strategies and the lack of regional convergence in the EU," ERSA conference papers ersa02p415, European Regional Science Association.
- Martin, Philippe & Ottaviano, Gianmarco I P, 2001.
"Growth and Agglomeration,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 947-68, November.
- Martin, Philippe & Ottaviano, Gianmarco, 1996. "Growth and Agglomeration," CEPR Discussion Papers 1529, C.E.P.R. Discussion Papers.
- Philippe Martin & Gianmarco Ottaviano, 1996. "Growth and Agglomeration," Working Papers 1996-14, CEPII research center.
- Philippe Martin & Gianmarco Ottaviano, 2001. "Growth and Agglomeration," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00179826, HAL.
- Gordon H. Hanson, 1998.
"Market Potential, Increasing Returns, and Geographic Concentration,"
NBER Working Papers
6429, National Bureau of Economic Research, Inc.
- H. Hanson, Gordon, 2005. "Market potential, increasing returns and geographic concentration," Journal of International Economics, Elsevier, vol. 67(1), pages 1-24, September.
- Hanson, G.H., 1999. "`Market Potential, Increasing Returns, and Geographic Concentration," Working Papers 439, Research Seminar in International Economics, University of Michigan.
- Amiti, Mary, 1998. "New Trade Theories and Industrial Location in the EU: A Survey of Evidence," Oxford Review of Economic Policy, Oxford University Press, vol. 14(2), pages 45-53, Summer.
- Fabio Canova & Albert Marcet, 1995.
"The poor stay poor: Non-convergence across countries and regions,"
Economics Working Papers
137, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 1999.
- Canova, Fabio & Marcet, Albert, 1995. "The Poor Stay Poor: Non-Convergence Across Countries and Regions," CEPR Discussion Papers 1265, C.E.P.R. Discussion Papers.
- Michele Boldrin & Fabio Canova, 2001. "Inequality and convergence in Europe's regions: reconsidering European regional policies," Economic Policy, CEPR;CES;MSH, vol. 16(32), pages 205-253, 04.
- Faini, Riccardo & Galli, Giampaolo & Gennari, Pietro & Rossi, Fulvio, 1997. "An empirical puzzle: Falling migration and growing unemployment differentials among Italian regions," European Economic Review, Elsevier, vol. 41(3-5), pages 571-579, April.
- Donald R. Davis & David E. Weinstein, 1997.
"Economic Geography and Reginal Production Structure: An Empirical Investigation,"
NBER Working Papers
6093, National Bureau of Economic Research, Inc.
- Davis, Donald R. & Weinstein, David E., 1999. "Economic geography and regional production structure: An empirical investigation," European Economic Review, Elsevier, vol. 43(2), pages 379-407, February.
- Donald R. Davis & David E. Weinstein, 1997. "Economic Geography and Regional Production Structure: An Empirical Investigation," Harvard Institute of Economic Research Working Papers 1802, Harvard - Institute of Economic Research.
- Donald R. Davis & David E. Weinstein, 1998. "Economic geography and regional production structure: an empirical investigation," Staff Reports 40, Federal Reserve Bank of New York.
- Baldwin, Richard E & Forslid, Rikard, 2000. "The Core-Periphery Model and Endogenous Growth: Stabilizing and Destabilizing Integration," Economica, London School of Economics and Political Science, vol. 67(267), pages 307-24, August.
- J.Peter Neary, 2001.
"Of Hype and Hyperbolas: Introducing the New Economic Geography,"
Journal of Economic Literature,
American Economic Association, vol. 39(2), pages 536-561, June.
- J. Peter Neary, 2000. "Of hype and hyperbolas : introducing the new economic geography," Working Papers 200019, School of Economics, University College Dublin.
- Puga, Diego, 2001.
"European Regional Policies in Light of Recent Location Theories,"
CEPR Discussion Papers
2767, C.E.P.R. Discussion Papers.
- Diego Puga, 2002. "European regional policies in light of recent location theories," Journal of Economic Geography, Oxford University Press, vol. 2(4), pages 373-406, October.
- Wolfgang HÄRDLE & J. MARRON & L. YANG, 1996. "Discussion," SFB 373 Discussion Papers 1996,65, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- S. Illeris & G. Akehurst, 2002. "Introduction," The Service Industries Journal, Taylor & Francis Journals, vol. 22(1), pages 1-3, January.
- Dohse, Dirk & Krieger-Boden, Christiane & Soltwedel, Rüdiger, 2000. "Emu Challenges Regional Labor Markets," ERSA conference papers ersa00p7, European Regional Science Association.
- Marius Brülhart, 1998. "Trading Places: Industrial Specialization in the European Union," Journal of Common Market Studies, Wiley Blackwell, vol. 36(3), pages 319-346, 09.
- Cuadrado-Roura, Juan R. & Garrido, Ruben & Mancha, Tomas, 2000. "Convergence And Regional Mobility In The European Union," ERSA conference papers ersa00p450, European Regional Science Association.
- Paul M Romer, 1999.
"Increasing Returns and Long-Run Growth,"
Levine's Working Paper Archive
2232, David K. Levine.
- Quah, Danny, 1996. "Regional Convergence Clusters Across Europe," CEPR Discussion Papers 1286, C.E.P.R. Discussion Papers.
- R. Paci & F. Pigliaru, 2001. "Technological Diffusion, Spatial Spillovers And Regional Convergence In Europe," Working Paper CRENoS 200101, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
- Enrique Lopez Bazo & Esther Vaya Valcarce & Antonio Jose Mora & Jordi Surinach Caralt, 1997. "Regional economic dynamics and convergence in the european union," Working Papers in Economics 12, Universitat de Barcelona. Espai de Recerca en Economia.
- Esteban, J., 2000. "Regional convergence in Europe and the industry mix: a shift-share analysis," Regional Science and Urban Economics, Elsevier, vol. 30(3), pages 353-364, May.
When requesting a correction, please mention this item's handle: RePEc:wiw:wiwrsa:ersa03p171. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gunther Maier)
If references are entirely missing, you can add them using this form.