No abstract

A large range of different approaches to determine a region’s total factor productivity (TFP) is currently used in the literature. As there is no generally recognized method, it is an important issue whether different approaches produce comparable results or whether results depend heavily on the chosen method. By employing a data set of 220 European regions over the period from 1990 to 2007, the present work compares a set of TFP estimation approaches and examines whether regional TFP levels and TFP growth rates obtained from the various approaches differ considerably from each other. More specifically, the neoclassical accounting approach, the cross-section approach, the pooled panel approach, and the fixed-effects approach are investigated. Furthermore, this article proposes an extension of the fixed-effects approach that allows estimation of both regional TFP levels and region-specific, long-term TFP growth rates in a single estimation procedure. The results clearly demonstrate that the choice between the examined approaches has an essential impact on estimation results for both TFP levels and TFP growth rates. From the apparent differences between the obtained results, it is reasonable to expect that follow-up analyses based on TFP estimates, for example, studies investigating the determinants of regional TFP, are affected by the model choice to a considerable extent. Therefore, it is important to examine whether one model is superior to others or whether it is only up to the scholar to choose a model.

Table A1. Variable description and data sources. Group Variable Description and calculation Source TFP Value added Value added in Euro per inhabitant, 2000 prices (1990-2014) Cambridge Econometrics Capital stock Capital stock in Euro per inhabitant, calculated applying the perpetual inventory method on investment data (1990-2014) Own calculation, Cambridge Econometrics Labor units Employees (units) per inhabitant (1990-2014) Cambridge Econometrics Culture a Importance of god 'How important is god in your life?' [Scale 1 (not all important) to 10 (very important)]EVS (1990, 1999, 2008) Disapproval of abortion 'Please tell me for each of the following statements whether you think it can always be justified, never be justified, or something in between, using this card: Abortion. ' [Scale 1 (always justifiable) to 10 (never justifiable)]EVS (1990, 1999, 2008) Children obedience faithTeach children obedience and faith rather than independence and determination. [Range -2 (priority for independence and determination) to 2 (priority for obedience and faith)]EVS (1990, 1999, 2008) National pride 'How proud are you to be [own nationality]?' [Scale 1 (not at all proud) to 4 (very proud)]