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Regional Productivity Growth Disparities in the Netherlands: A Detailed Industry Analysis

This study examines the productivity growth differences at the industry level in the Netherlands using a growth accounting approach. The research delves into factors such as agglomeration effects and congestion, aiming to explain the slowdown in Dutch productivity growth compared to the USA and Europe. Policy implications regarding labor productivity are discussed. The methodology, results, explanations for multifactor productivity (MFP) growth, and implications for national and regional goals are explored. The study utilizes a panel data analysis on labor productivity growth across twelve Dutch provinces, shedding light on the contributions of various regional inputs. This detailed analysis aims to provide valuable insights for policymakers and stakeholders interested in enhancing productivity at both the national and regional levels.

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Regional Productivity Growth Disparities in the Netherlands: A Detailed Industry Analysis

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  1. Differences in ProductivityGrowth in the Netherlands:An Industry-level Growth Accounting Approach54nd American Meeting of the Regional Science Association Hyatt Regency Hotel, Savannah, USA, November 7-10, 2007 Lourens Broersma & Jouke van Dijk Faculty of Spatial Sciences University of Groningen jouke.van.dijk@rug.nl www.joukevandijk.nl

  2. Outline • Motivation • Facts and figures • Methodology: growth accounting approach /econometric approach • Results • Explaning mfp-growth • Concluding remarks • Policy implications

  3. Motivation for this study • Can (part of) the slowdown in Dutch productivity growth relative to the USA and relative to Europe be explained from developments at the regional perspective? • Specifically: what is the role of agglomeration and congestion effects • Increase labour productivity is a national and regional policy goal: implications of our results

  4. Motivation for this study Trends in labour productivity growth USA, EU-15 and NL Source: GGDC (at www.ggdc.net)

  5. Motivation for this study Trend in mfp-growth rates of USA, EU-15 and NL, 1990-2002 Source: GGDC (at www.ggdc.net)

  6. Motivation for this study Vehicle kilometres per 1000 inhabitants in the UK, NL & USA Source: UK Office of National Statistics, US Dept. of Transport, Statistics Netherlands)

  7. G r o n i n g e n core-periphery boundary F r i e s l a n d D r e n t h e N o o r d - H o l l a n d F l e v o l a n d O v e r i j s s e l Randstad G e l d e r l a n d U t r e c h t Z u i d - H o l l a n d N o o r d - B r a b a n t Z e e l a n d L i m b u r g Panel dataanalysis on labour productivity growth for twelve Dutch provinces limitations

  8. Labour productivity (12 provinces) Level 2002 Growth 1991-2002

  9. Methodology • Econometric approach • Specify and estimate production function • Interpret estimated parameter values in terms of contribution to productivity growth • Growth accounting vs. econometric approach • GA based on microeconomic theory • GA easy to interpret • GA very data demanding • Ec. approach straightforward to apply • Ec. approach implies econometric problems (simultaneity), which require complicated techniques and parameters may still be difficult to interpret

  10. Growth Accounting: decomposition technique for productivity GROWTH • Calculates the contribution of: • Non-IT capital • IT-capital • Quality of labour • Sectoral reallocation of labour • Residual: MFP growth = disembodied technical progress (regional competetiveness)

  11. Growth accounting • Growth accounting technique is capable of obtaining contributions of different regional inputs to regional productivity growth • Growth accounting is very data demanding • Application to regional data for The Netherlands gives plausible results and are nation-wide comparable to results of other country-studies

  12. Periphery Core Groningen Friesland Drenthe Overijssel Flevoland Gelderland Utrecht Noord-Holland Zuid-Holland Zeeland Noord-Brabant Limburg Netherlands -1.00 -0.50 0.00 0.50 1.00 1.50 2.00 2.50 Quality of labour IT capital deepening non-IT capital deepening MFP growth Reallocation of labour Sources of labour productivity growth in The Netherlands at regional level, 1995-2002 Reallocation of labour MFP-growth Quality of labour / Non IT Capital / IT capital

  13. Results • Regional differences in labour productivity growth are primarily driven by regional differences in mfp-growth • Mfp-growth is low in western (economic core) regions and high in peripheral regions • Contribution of labour quality (education) and IT use relatively low in periphery

  14. Explaining mfp-growth Indicators, besides labour and capital, that affect productivity growth: • Sectoral composition (-/+) • Innovation / R&D (+) • Agglomeration effects (+) • Congestion (-)

  15. Model specification We use a panel of regional data for twelve provinces and six years (1997 through 2002) for estimation. Fixed effects: regions, time, sectoral composition R & D Agglomeration Congestion

  16. Estimation results explanatory model MFP growth 1995-2002 (1)

  17. Estimation results explanatory model MFP growth 1995-2002 (2) Negative congestion effect > positive agglomeration effect

  18. Contributions to the regional variation in mfp-growth, 1998-2002 Regional factors are more important for the explanation of regional differences in mfp-growht than sectoral factors

  19. Conclusions • Analysisgrowth of labour productivity: Growth Accounting – MFP-growth • Factors that matter: • MFP-growth > IT capital > non-IT capital > labour quality > reallocation of labour • MFP-growth explained by sectoral composition, but mainly by regional factors congestion (negative) and agglomeration (positive). R&D not very important. • (-) Congestion > (+) agglomeration effect

  20. Concluding remarks • Reasons why the Dutch productivity growth rate is low in the second part of the 1990’s, based on regional growth accounting, are: • lagging contributions of education and use of IT capital in peripheral regions • lagging mfp-growth in the core regions, which is partly caused by congestion

  21. Policy implications • Labor productivity versus employment growth versus labor costs • Differences between regions – firms • Relation education – innovation • Policy to increase labour productivity and maximize contribution of each regional to national welfare or: reduction of regional disparities? • Schooling? Focus on higher education or basic skills? R&D – innovation (technical – social / product – process) • Government investments in core or periphery?

  22. Differences in ProductivityGrowth in the Netherlands:An Industry-level Growth Accounting Approach54nd American Meeting of the Regional Science Association Hyatt Regency Hotel, Savannah, USA, November 7-10, 2007 Lourens Broersma & Jouke van Dijk Faculty of Spatial Sciences University of Groningen jouke.van.dijk@rug.nl www.joukevandijk.nl

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