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

Author

Listed:
  • 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)

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.

Suggested Citation

  • Hazwan Haini & Pang Wei Loon, 2023. "Do regional integration and trade linkages promote productivity spillovers? Evidence from the European Union," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 23(1), pages 64-90.
    • Handle: RePEc:bic:journl:v:23:y:2023:i:1:p:64-90
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    File URL: https://www.tandfonline.com/doi/epdf/10.1080/1406099X.2023.2198284
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    More about this item

    Keywords

    European union (EU); Eurozone; spillovers; totalfactor productivity (TFP); spatial Durbin model;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • O49 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Other
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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