The Role of Structural Change in European Regional Productivity Growth

Abstract

O’Leary E. and Webber D. J. The role of structural change in European regional productivity growth, Regional Studies. Recent literature suggests that inter-sectoral structural change has a negligible impact on aggregate productivity growth. Through the application of dynamic shift–share methods, this paper presents a re-examination of this perspective using data for 181 European regions from 1980 to 2007. Results suggest that the effect of the inter-sectoral component is far from negligible and is substantially stronger for those regions towards the higher deciles of the distribution. Moreover, its effects appear to be particularly growth enhancing when the region is either ‘high and improving’ or ‘low and deteriorating’. These results rehabilitate the importance of structural change for growth and convergence.