DP13703 Do High-Quality Local Institutions Shape Labour Productivity in Western European Manufacturing Firms?

Author(s): Roberto Ganau, Andrés Rodríguez-Pose
Publication Date: April 2019
Keyword(s): Cross-Country Analysis, labour productivity, Manufacturing firms, Regional Institutions, Western Europe
JEL(s): C23, D24, H41, R12
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13703

We investigate the extent to which regional institutional quality shapes firm labour productivity in western Europe, using a sample of manufacturing firms from Austria, Belgium, France, Germany, Italy, Portugal and Spain, observed over the period 2009-2014. The results indicate that regional institutional quality positively affects firms' labour productivity and that government effectiveness is the most important institutional determinant of productivity levels. However, how institutions shape labour productivity depends on the type of firm considered. Smaller, less capital endowed and high-tech sectors are three of the types of firms whose productivity is most favourably affected by good and effective institutions at the regional level.