Determinants of Productivity Gap in the European Union: A Multilevel Perspective

60 Pages Posted: 4 Sep 2019

See all articles by Randolph Luca Bruno

Randolph Luca Bruno

UCL SSEES; Institute for the Study of Labor (IZA)

Elodie Douarin

University of Sussex

Julia A. Korosteleva

University College London - School of Slavonic and East European Studies (SSEES) - Social Science Department

Slavo Radosevic

University College London - School of Slavonic and East European Studies

Abstract

The paper explores the determinants of productivity gap within the European Union in four industrial manufacturing sectors (computers, chemicals, basic metals and food) of strong macroeconomic significance and varied 'Research and Development' (R&D) intensity. Our analysis reveals that some of the most important factors determining productivity gap across the EU are related to technology gap variables - R&D intensity and R&D embedded in purchased equipment and machinery - and how they interact. While the signs for both R&D and embedded R&D are as expected and our results emphasise the relevance of technology for closing the productivity gap, this is not the case with the interaction between these two variables. The estimates for the interaction terms are indeed very significant and consistently negative in three out of four sectors. This negative relationship suggests that there is no complementarity between these two modes of technology acquisition - R&D and embedded R&D investments - which are however each separately crucial for catching up. In policy terms, this situation suggests that there is a lack of coordination between R&D policy and technology transfer (FDI, trade and industrial policy). Given that, our results also show a widening productivity gap between the countries of the EU periphery (South and East) and the rest of the sample.

Keywords: productivity, technology gap, multilevel analysis, European Union

JEL Classification: L60, O33, C55

Suggested Citation

Bruno, Randolph Luca and Douarin, Elodie and Korosteleva, Julia A. and Radosevic, Slavo, Determinants of Productivity Gap in the European Union: A Multilevel Perspective. IZA Discussion Paper No. 12542, Available at SSRN: https://ssrn.com/abstract=3445808

Randolph Luca Bruno (Contact Author)

UCL SSEES ( email )

16 Taviton Street
London, WC1H 0 BW
United Kingdom

HOME PAGE: http://https://www.ucl.ac.uk/ssees/people/randolph-bruno

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Elodie Douarin

University of Sussex ( email )

Sussex House
Falmer
Brighton, Sussex BNI 9RH
United Kingdom

Julia A. Korosteleva

University College London - School of Slavonic and East European Studies (SSEES) - Social Science Department ( email )

Malet Street
London WC1E 7HU
United Kingdom

Slavo Radosevic

University College London - School of Slavonic and East European Studies ( email )

Malet Street
London WC1E 7HU
United Kingdom

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