The regional pervasiveness of local productivity shocks on macroeconomic output in Europe

Xieer Dai

Spatial Economic Analysis, 2024, vol. 19, issue 3, 364-393

Abstract: This paper studies inter-regional technology spillover in EU-28 countries and shows how regional total factor productivity (TFP) shocks shape aggregate productivity in Europe. This paper provides evidence that several regions play a significant role as common factors in the production function of almost every other region. We provide a procedure to identify and test these regions through inter-regional trade flows. In our estimations, the ten most pervasive regions out of 272 NUTS 2 regions explain about 12% of the total factor productivity growth in the EU-28 countries. Significant heterogeneity exists in the region’s ability to absorb imported knowledge among these countries. Local knowledge stock’s contribution is limited compared to imported knowledge due to a regional disparity in R&D distribution. Our work contributes to understanding the granular features of spatial macroeconomics, with a particular focus on inter-regional trade flows and knowledge spillovers.

Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:taf:specan:v:19:y:2024:i:3:p:364-393

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DOI: 10.1080/17421772.2024.2316020

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