Abstract
An empirical two-equation dynamic panel-data model system with fixed effects is proposed to analyze the relationship between knowledge creation and economic performance across regions over time. Estimates of the model for Spanish regions show that (i) knowledge creation depends on local R&D effort, on the amount of knowledge in use, and on knowledge creation in neighboring regions; and (ii) assimilation of new knowledge depends on local knowledge creation and on assimilation of knowledge in neighboring regions. Both processes include region-specific context fixed effects and region-specific time effects, representing region-specific dynamic influences. The results imply that (a) efficiency gains at regional level may be achieved by investing locally in the creation of new knowledge, either technological or organizational; (b) creation of knowledge in a region may be promoted by using greater amounts of already existing knowledge, as well as by increasing local R&D effort; (c) both knowledge creation and knowledge assimilation spread to/from neighboring regions; and (d) regional contexts influence both knowledge creation and knowledge assimilation separately.
Highlights
The levels of Gross Domestic Product (GDP) per capita often diverge for long periods across countries and across regions within countries, as is the case for Spain
This paper aims at clarifying whether and how the creation and assimilation of knowledge in a region improve its economic performance through efficiency gains in the use of the available resources, which would result in faster economic growth and higher well-being
The analysis conducted in this paper highlights the relevance of local knowledge creation and assimilation in explaining differences in growth rates among Spanish regions over time
Summary
The levels of Gross Domestic Product (GDP) per capita often diverge for long periods across countries and across regions within countries, as is the case for Spain. This paper aims at clarifying whether and how the creation and assimilation of knowledge in a region improve its economic performance through efficiency gains in the use of the available resources, which would result in faster economic growth and higher well-being. According to OECD (2000), increases in efficiency, measured as multi-factor producti vity (MFP) gains, are the result of using new technology along with more efficient ways of organizing production. In this environment, education as a source for knowledge creation and assimilation becomes more prominent in explaining divergences in economic growth among territories. Higher education relates to labor productivity in several ways via the creation of new knowledge.
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