Explaining the distribution of manufacturing productivity in the EU regions

Regional inequalities in product per capita and labour productivity in the EU are large and persistent. Building on a model in which aggregate increasing returns is the result of the increase in the number of varieties of composite services, under competitive manufactures, we derive a simple and empirically tractable reduced form linking manufacturing productivity growth to the growth of manufacturing output. This specification is used to simulate the equilibrium distribution of labour productivity in the EU regions, that is compared with "virtual" distributions obtained by equalizing, for instance, the amount of returns to scale and the stock of human capital across regions. This way, the impact of some growth determinants on the whole EU regional equilibrium distribution can be assessed.

DOES HUMAN CAPITAL STIMULATE INVESTMENT IN PHYSICAL CAPITAL? EVIDENCE FROM A COST SYSTEM FRAMEWORK

The direct effect of human capital on economic growth has been widely analysed in the economic literature. This paper, however, focuses on its indirect effect as a stimulus for private investment in physical capital. The methodological framework used is the duality theory, estimating a cost system aggregated with human capital. Empirical evidence is given for Spain for the period 1980-2000. We provide evidence on the indirect effect of human capital in making private capital investment more attractive. Among the main explanations for this process, we observe that higher worker skill levels enable higher returns to be extracted from investment in physical capital.

Regional returns to physical capital: are they conditioned by educational attainment?

This paper provides novel empirical evidence of the indirect effect of educational attainment on regional economic growth, through its influence on the profitability of investment in physical capital. We test the hypothesis that the regional heterogeneity of the return to physical capital can be directly related to the existing heterogeneity in the educational attainment of workers. The results for the Spanish case support our hypothesis that the higher the educational attainment of workers the greater the returns on investment in physical capital. In fact, this effect seems to be sufficiently strong to have counterbalanced the traditional mechanism of decreasing returns to capital accumulation.returns to capital, human capital, productivity, cost system

Do innovation and human capital explain the productivity gap between small and large firms?

Empirical evidence is compelling that large firms are more productive than small firms. The hypothesis in this paper is that the productivity differences between small and large firms are associated with two of the main determinants of a firm’s performance: the human and technological capital that firms incorporate. We suggest that the contribution of these factors in explaining the size of the productivity gap might not only be due to the fact that large firms make a more extensive use of them, but also because large firms obtain higher returns from their investment in human and technological capital. The evidence we obtain for a comprehensive sample of Spanish manufacturing firms (1990-2002) supports this hypothesis, which has important implications for the effectiveness of policies designed to improve productivity in SMEs by stimulating innovation and the use of more skilled workers.total factor productivity; innovation; skilled labour; firm size.

Decomposing differences in total factor productivity across firm size.

This paper investigates the extent to which the gap in total factor productivity between small and large firms is due to differences in the endowment of factors determining productivity and to the returns associated with these factors. We place particular emphasis on the contribution of differences in the propensity to innovate and in the use of skilled labor across firms of different size. Empirical evidence from a representative sample of Spanish manufacturing firms corroborates that both differences in endowments and returns to innovation and skilled labor significantly contribute to the productivity gap between small and large firms. In addition, it is observed that the contribution of innovation to this gap is caused only by differences in quantity, while differences in returns have no effect; in the case of human capital, however, most of the effect can be attributed to increasing differences in returns between small and large firms.Total Factor Productivity, skilled labor, innovation, firm size, Oaxaca decomposition

Evaluating the optimality of Spanish industry (1980-1993)

This paper tests whether Spanish industry adjusted the amount of inputs and output to those considered optimal given their prices in each time period. With this aim, we use the short- and long-run equilibrium models given by duality theory, and we apply the optimality tests derived from them for the case of Spanish manufactures from 1980 to 1993. The results obtained point to a disequilibrium in manufactures' behaviour, although it has been vanishing through the period under consideration.

The regional distribution of spanish unemployment. A spatial analysis

This paper proposes a set of tools to analyse the regional distribution of unemployment. As we are interested in the characteristics of the whole distribution, we complement results from the traditional regression analysis with those from the estimation of its external shape before and after being conditioned to factors underlying regional unemployment. Besides, the paper explicitly addresses the spatial characteristics of the distribution, and the empirical model build to determine the explanatory factors includes spatial effects. We apply this framework to the study of the provincial distribution of unemployment rates in Spain in the mid-eighties and late nineties, when economic transformations could have caused different regional responses. Results point to increasing spatial dependence in the distribution of regional unemployment rates, and a change in the factors causing regional differentials over the last decade.

Complementarity between human capital and trade in regional technological progress

The effect of openness and trade orientation on economic growth remains a highly contentious issue. Trade facilitates knowledge diffusion and the adoption of more advanced and efficient technologies which faster total factor productivity (TFP) growth and, hence, per capita income. New technologies that diffuse by trade require a sufficiently qualified labour force to adapt them into the domestic productive environment. Thus, openness and human capital accumulation will lead to TFP growth, and the larger the complementarity between both variables the higher TFP growth. The paper discusses the implications of these assumptions and tests their empirical validity using a pool of data for the industrial sector in the Spanish regions in a period in which both the stock of human capital and openness experienced a not able improvement. Key words: trade, human capital, technological progress and regions. JEL category: C23, D24, O33.

Public infrrastructure and the performance of manufacturing industries: Short-and long-run

We present a theoretical framework for determining the short- and long-run effects of infrastructure. While the short-run effects have been the focus of most previous studies, here we derive long-run elasticities by taking into account the adjustment of quasi-fixed inputs to their optimum levels. By considering the impact of infrastructure on private investment decisions, we observe how, apart from the direct effect on costs in the short-run, infrastructure exerts an indirect source of influence in the long-run through their effect on private capital. The model is applied to manufacturing industries in the Spanish regions.long-run vs short-run equilibrium, public ingrastructure, manufacturing costs

Complementarity between human capital and trade in regional technological progress

The effect of openness and trade orientation on economic growth remains a highly contentious issue in the literature. Trade facilitates the spread of knowledge and the adoption of more advanced and efficient technologies, which hastens total factor productivity (TFP) growth and, hence, per capita income. New technologies that spread through trade require a sufficiently skilled labour force to adapt them to the domestic productive environment. Thus, openness and human capital accumulation will lead to TFP growth and the greater the complementarity between both variables, the higher the TFP growth. This paper discusses the implications of these assumptions and tests their empirical validity, using a pool of data for manufacturing industry in Spanish regions in a period in which both the stock of human capital and openness experienced a notable increase.technological progress, industry, human capital, trade