The contributions of human capital, R&D spending and convergence to total factor productivity growth

Abstract

The study investigates the drivers of total factor productivity (TFP) growth, covering 99 European regions from 31 countries over the period 2000–13. It shows that human capital endowment had a positive effect upon TFP growth, particularly in advanced regions, but the effect from regions’ own research and development (R&D) expenditures was largely absent. The effects of human capital and R&D on TFP growth varied with the productivity gap. Further, there was a threshold effect in convergence, where stronger TFP growth was associated with both a larger productivity gap and a higher initial level of productivity. Spatial spillover effects had a positive impact upon TFP growth.