Papers in Evolutionary Economic Geography

September 8, 2015

# 15.27 Firm Dynamics and Regional Inequality of Productivity in China

Canfei He, Yi Zhou

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Industrial change processes are underlying forces that determine the change of regional productivity. In developed market economies, less productive firms are more likely to exit while productive firms have more chance to enter and to survive. As a result, spatial inequality of firm dynamics will directly influence the inequality of regional productivity. This study investigates how firm dynamics would affect regional productivity using firm level data during 1998-2007 in China. We first estimate total factor productivity (TFP) for each firm based on the semi-parametric method proposed by Olley and Pakes (1996). Regional productivity is derived by weighing the firm TFP using gross industrial output. There is considerable spatial inequality of TFP paired with a trend of convergence over the time period of 1999-2007. Decomposition of TFP growth shows that firm entry, exit and survival do contribute to TFP change and their contributions vary across prefectures substantially. The between share holds the largest regional difference, as the most important factor contributing to the spatial inequality of regional TFP. The restructuring of SOEs has critically contributed to the spatial inequality of TFP by raising TFP in the traditional industrial bases and by facilitating the development of productive private and foreign sectors particularly in the coastal region. The finding indicates that resource reallocation across firms with different ownerships is the key mechanism to improve regional productivity.

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August 28, 2015

# 15.25 Smart Specialization Strategies and Key Enabling Technologies. Regional evidence from European patent data.

Sandro Montresor and Francesco Quatraro

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The paper investigates the drivers of Smart Specialisation Strategies (S3) with a focus on Key Enabling Technologies (KETs). We re-examine the interpretation of S3 as new regional technological advantages (RTAs) obtained through relatedness, by reconceptualising within it the original focus on General Purpose Technologies (GPTs) and by considering their inter-regional spillovers. Combing regional patent and economic data for a 30-year panel (1980-2010) of 26 European countries, we find that KETs positively impact on new RTAs, pointing to a novel “enabling” role for them. KETs also negatively moderate the RTAs-impact of cognitively proximate pre-existing technologies, suggesting that KETs could make relatedness less binding in pursuing S3. The net-impact of KETs is positive, pointing to a new case for plugging KETs in the S3 policy tool-box. Furthermore, KETs also display cross-regional spillovers in their RTAs-impact, leaving KETs “poor” regions with a possible back-up from closer KETs “rich” ones.

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