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PRODUCTIVITY GROWTH IN THE OLD AND NEW EUROPE: THE ROLE OF AGGLOMERATION EXTERNALITIES

Authors


  • The research leading to these results has received funding from the ESPON project KIT, Knowledge, Innovation, Territory. We would like to thank Barbara Dettori for excellent research assistance. We have benefited from valuable comments by participants to DIME workshop in Pecs and to conferences RES in London, IEA in Beijing, EPI in Parma, EEA in Oslo, ERSA in Barcelona.

ABSTRACT

As Europe is currently characterized by huge disparities in the economic performance of “old” and “new” states, we investigate whether this is the result of local agglomeration—specialization and diversity—externalities. Our spatial econometric analysis focuses on total factor productivity dynamics over the period 1996–2007 for 13 industries located in 276 European regions. Consistently with the “nursery cities” theory, we find that diversity exerts a positive effect in the knowledge-intensive services of the “old” Europe urban areas, while specialization is still effective in the “new” Europe low-tech manufacturing. Human and technological capital has also a positive impact.

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