Productivity growth in the Old and New Europe: the role of agglomeration externalities

Marrocu, E.;Paci, R.;Usai, S.

2013-01-01

---

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 have also a positive impact.