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

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  • Xieer Dai

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.

Suggested Citation

  • Xieer Dai, 2024. "The regional pervasiveness of local productivity shocks on macroeconomic output in Europe," Spatial Economic Analysis, Taylor & Francis Journals, vol. 19(3), pages 364-393, July.
    • Handle: RePEc:taf:specan:v:19:y:2024:i:3:p:364-393
    DOI: 10.1080/17421772.2024.2316020
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