Do regional integration and trade linkages promote productivity spillovers? Evidence from the European Union

• Published in: Baltic journal of economics Vol. 23; no. 1; pp. 64 - 90
• Main Author: Haini, Hazwan
• Format: Journal Article
• Language: English
• Published: Riga BICEPS/SSE Riga 2023; Routledge; Taylor & Francis Ltd; Taylor & Francis Group
• Subjects: C23; Economic development; Economic growth; Economic history; Economic policy; Efficiency; Estimates; EU-Accession / EU-DEvelopment; European union (EU); Eurozone; Literature reviews; National Economy; Political economy; Productivity; Socio-Economic Research; spatial Durbin model; Spillover effect; spillovers; Supranational / Global Economy; total factor productivity (TFP); spatial Durbin model; total factor productivity (TFP); spillovers; European union (EU); Eurozone
• ISSN: 1406-099X; 2334-4385
• DOI: 10.1080/1406099X.2023.2198284

This study examines the productivity and efficiency spillovers in the presence of trade linkages in 27 European Union countries from 1990 to 2019. The European Union is one of the largest trading blocs in the world and has implemented costly policies and reforms to improve productivity growth. Meanwhile, tradeinduced productivity and efficiency spillovers have often been overlooked in the literature, and examining them could provide further clarity to the productivity puzzle. Using a spatial Durbin model and a bilateral trade matrix, this study estimates a spatial stochastic production frontier model using data from the Penn World Table and the World Integrated Trade Solution. We decompose production frontier estimates to obtain the spillover effects of total factor productivity growth and technical efficiency from a network of bilateral trading partners. Our results provide evidence of productivity and efficiency spillovers; however, the gains are uneven. Policy implications are discussed.