Determinants of Total Factor Productivity in Visegrad Group Nuts-2 Regions

Barbara Danska-Borsiak ()
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Barbara Danska-Borsiak: Faculty of Economics and Sociology, University of Łódź, Łódź, Poland

Acta Oeconomica, 2018, vol. 68, issue 1, 31-50

Abstract: This article attempts to estimate the total factor productivity (TFP) for 35 NUTS-2 regions of the Visegrad Group countries and to identify its determinants. The TFP values are estimated on the basis of the Cobb-Douglas production function, with the assumption of regional differences in productivity. The parameters of the productivity function were analysed with panel data, using a fixed effects model. There are many economic variables that influence the TFP level. Some of them are highly correlated, and therefore the factor analysis was applied to extract the common factors – the latent variables that capture the common variance among those observed variables that have similar patterns of responses. This statistical procedure uses an orthogonal transformation to convert a set of observations of possibly correlated variables into a set of values of linearly uncorrelated variables called principal components. Each component is interpreted using the contributions of variables to the respective component. I estimated a dynamic panel data model describing TFP formation by regions. An attempt was made to incorporate the common factors among the model’s explanatory variables. One of them, representing the effects of research activity, proved to be significant.

Keywords: Total Factor Productivity (TFP); Visegrad Group; regional analysis; dynamic panel data model; factor analysis (search for similar items in EconPapers)
JEL-codes: C01 C23 E22 O33 O47 (search for similar items in EconPapers)
Date: 2018
Note: We are especially grateful to the referees of Acta Oeconomica for their comments, as well as to Associate Professor George Filis (Bournemouth University, UK) for his continuous aid, support, and guidance during the completion of this research.
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