Cross-Region Knowledge Spillovers and Total Factor Productivity: European Evidence Using a Spatial Panel Data Model

20 Pages Posted: 9 Oct 2007

See all articles by Manfred M. Fischer

Manfred M. Fischer

Vienna University of Economics and Business - Institute for Economic Geography and GIScience, Department of Socioeconomics

Thomas Scherngell

AIT - Austrian Institute of Technology

Martin Reismann

Vienna University of Economics and Business - Department of Economic Geography and Geoinformatics

Date Written: August 2007

Abstract

This paper concentrates on the central link between productivity and knowledge capital, and shifts attention from firms and industries to regions. The objective is to measure knowledge elasticity effects within a regional Cobb-Douglas production function framework, with an emphasis on knowledge spillovers. The analysis uses a panel of 203 European regions to estimate the effects over the period 1997-2002. The dependent variable is total factor productivity (TFP). We use a region-level relative TFP index as an approximation to the true TFP measure. This index describes how efficiently each region transforms physical capital and labour into outputs. The explanatory variables are internal and out-of-region stocks of knowledge, the latter capturing the contribution of interregional knowledge spillovers. We use patents to measure knowledge capital. Patent stocks are constructed such that patents applied at the European Patent Office in one year add to the stock in the following and then depreciate throughout the patents effective life according to a rate of knowledge obsolescence. A random effects panel data spatial error model is advocated and implemented for analyzing the productivity effects. The findings provide a fairly remarkable confirmation of the role of knowledge capital contributing to productivity differences among regions, and adding an important dimension to the discussion, showing that knowledge spillover effects increase with geographic proximity.

Keywords: Total factor productivity, knowledge spillovers, European regions, panel data, spatial econometrics

JEL Classification: C23, O49, O52, R15

Suggested Citation

Fischer, Manfred M. and Scherngell, Thomas and Reismann, Martin, Cross-Region Knowledge Spillovers and Total Factor Productivity: European Evidence Using a Spatial Panel Data Model (August 2007). Available at SSRN: https://ssrn.com/abstract=1019449 or http://dx.doi.org/10.2139/ssrn.1019449

Manfred M. Fischer (Contact Author)

Vienna University of Economics and Business - Institute for Economic Geography and GIScience, Department of Socioeconomics ( email )

Welthandelsplatz 1, D4
Vienna, 1020
Austria

Thomas Scherngell

AIT - Austrian Institute of Technology ( email )

Donau-City-Strasse 1
Vienna, 1220
Austria

Martin Reismann

Vienna University of Economics and Business - Department of Economic Geography and Geoinformatics ( email )

Augasse 2-6
Vienna A-1090, 1090
Austria

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