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Institutions & the productivity challenge for European regions
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Institutions & the productivity challenge for European regions

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Europe has witnessed a considerable labour productivity slowdown in recent decades. Many potential explanations have been put forward to try to address this so-called productivity ‘puzzle’. However, how the quality of local institutions influences labour productivity in different parts of Europe has been, so far, overlooked by the literature. This paper addresses this gap in our knowledge by evaluating how the quality of local institutions affects changes in labour productivity at a regional level, across 248 European regions during the period between 2003 and 2015. The results indicate that institutional quality plays a crucial role in determining different regional labour productivity trajectories. This role is both direct – as improvements in institutional quality have a substantial impact on productivity growth – as well as indirect – as the returns of investments in human capital and local innovative capacity rise significantly as the quality of government increases.
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ISSN 2443-8022
ISBN 978-92-76-11184-9
DOI 10.2765/77210
Uimhir chatalóige KC-BD-19-003-EN-N
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ISSN 2443-8022 ISBN 978-92-76-11184-9 DOI 10.2765/77210 Uimhir chatalóige KC-BD-19-003-EN-N
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