Verdoorn's law is estimated in a spatial econometric framework for individual manufacturing industries using EU regional data. Estimates of encompassing returns to scale are large, but other explanatory variables, including measures of industrial specialization and diversity, tend to be insignificant. The method of normalization with either output or input growth as the regressor matters, and the use of an instrumental variable approach does not resolve this problem. As in other studies, the static-dynamic Verdoorn law paradox exists. A theoretical argument is made, however, that the dynamic Verdoorn law is the correct specification and this is confirmed empirically.
[Show abstract][Hide abstract] ABSTRACT: There is significant academic evidence that growth in one country tends to have a positive impact on growth in neighboring countries. This paper contributes to this literature by assessing whether growth spillovers tend to vary significantly across world regions and by investigating the contribution of transport and communication infrastructure in promoting neighborhood effects. The study is global, but the main interest is on Sub-Saharan Africa. The authors define neighborhoods both in geographic terms and by membership in the same regional trade association. The analysis finds significant evidence for heterogeneity in growth spillovers, which are strong between OECD countries and essentially absent in Sub-Saharan Africa. The analysis further finds strong interaction between infrastructure and being a landlocked country. This suggests that growth spillovers from regional"success stories"in Sub-Saharan Africa and other lagging world regions will depend on first strengthening the channels through which such spillovers can spread -- most importantly infrastructure endowments.
World Economy 01/2009; 34(5153). DOI:10.1111/j.1467-9701.2011.01392.x · 0.76 Impact Factor
[Show abstract][Hide abstract] ABSTRACT: This paper examines the determinants of total factor productivity (TFP) using a British plant-level dataset. It considers the role of the following four plant characteristics: internal and external knowledge; foreign ownership; multi-plant economies of scale and competition; and spatial spillovers and ‘place’ effects. A wide range of results are obtained, most of which confirm earlier results in the literature, such as that undertaking R&D is positively associated with TFP and most foreign ownership groups have higher than average TFP. The results also confirm the very small number of studies in the literature that have shown that the age of the plant is negatively related to TFP and therefore that vintage effects outweigh any learning-by-doing effects. The inclusion of a wide range of determinants of TFP allows comment on the relative importance of different groups of TFP determinants; knowledge creation is found to be the most important determinant of TFP (especially in manufacturing), with spatial location impacts overall the next largest determinant. Foreign-ownership is founded to be (overall) the least important determinant of TFP although this is partly the consequence of the relatively small size of the foreign-owned sector.
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