Do regional integration and trade linkages promote productivity spillovers? Evidence from the European Union

Hazwan Haini () and Pang Wei Loon
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Hazwan Haini: School of Business and Economics, Universiti Brunei Darussalam, Bandar Seri Begawan, Brunei
Pang Wei Loon: School of Business and Economics, Universiti Brunei Darussalam, Bandar Seri Begawan, Brunei

Baltic Journal of Economics, 2023, vol. 23, issue 1, 64-90

Abstract: This study examines the productivity and efficiency spillovers in the presence of trade linkages in 27 European Union countries from 1990 to 2019. The European Union is one of the largest trading blocs in the world and has implemented costly policies and reforms to improve productivity growth. Meanwhile, trade-induced productivity and efficiency spillovers have often been overlooked in the literature, and examining them could provide further clarity to the productivity puzzle. Using a spatial Durbin model and a bilateral trade matrix, this study estimates a spatial stochastic production frontier model using data from the Penn World Table and the World Integrated Trade Solution. We decompose production frontier estimates to obtain the spillover effects of total factor productivity growth and technical efficiency from a network of bilateral trading partners. Our results provide evidence of productivity and efficiency spillovers; however, the gains are uneven. Policy implications are discussed.

Keywords: European union (EU); Eurozone; spillovers; totalfactor productivity (TFP); spatial Durbin model (search for similar items in EconPapers)
JEL-codes: C23 C31 D24 O49 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:bic:journl:v:23:y:2023:i:1:p:64-90

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