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REGIONAL DISPARITIES IN LABOUR PRODUCTIVITY AND THE ROLE OF CAPITAL STOCK

Published online by Cambridge University Press:  28 July 2020

Ben Gardiner ,
Bernard Fingleton  and
Ron Martin
Ben Gardiner
Affiliation:
Director, Cambridge Econometrics, CambridgeUK, e-mail: [email protected].
Bernard Fingleton
Affiliation:
Department of Land Economy, University of Cambridge, e-mail: [email protected]
Ron Martin
Affiliation:
Department of Geography, University of Cambridge, e-mail: [email protected].
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Abstract

This paper reports on the availability of regional capital stock data,1 in the form of new/updated regional (NUTS2 level) capital stock estimates,2 building on an approach (Perpetual Inventory Method) which had been previously developed for the European Commission. The particular focus here is on the UK and how these data are used to shed light on regional labour productivity disparities. Using a NUTS2 level dataset constructed for the period 2000–16, we use a dynamic spatial panel approach from Baltagi et al. (2019) to estimate a model relating productivity to output (growth or levels) and augmented by explicit incorporation of capital stock plus various other covariates such as human capital. We find that regional variations in capital stocks per worker make a significant contribution to regional variations in labour productivity, but the geography of human capital is also highly relevant. Moreover, we give evidence to show that as human capital rises, notably as we move from the regions to London, the impact of capital stock per worker is less. The effect of capital stock depends on the level of human capital.

Keywords

Regional DisparitiesLabour ProductivityCapital StockDynamic Spatial Panel ModelC23C33D24O47R12
Type
Research Article
Information
National Institute Economic Review , Volume 253 , August 2020 , pp. R29 - R43
Copyright
© National Institute of Economic and Social Research, 2020

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