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Richard Harris

In recent years the OECD and other commentators have stressed the importance, in explaining the productivity problem in many countries, of the prevalence of firms that operate at the (regional, national and international) ‘frontier’ of technology (i.e., those with the highest levels of productivity), together with whether diffusion and/or reallocation of output shares across firms is optimal. There is a general concern that many regional (national) frontier firms are disconnected from the national (international) frontier, laggard firms tend not to catch up to the national frontier, and resources are stuck in a tail of small and unproductive firms; hence, a large share of employment and capital is concentrated in firms with low productivity: i.e., there are too many small, old and relatively unproductive firms that neither grow rapidly nor exit the market. Diffusion from the global to the national frontier requires a sufficient level of innovativeness, global connections via trade, FDI, participation in global value chains and the international mobility of skilled labour - all of which are likely to be under pressure due to COVID19. This chapter will consider how predicted trends due to the pandemic - such as, the adoption of new e-commerce, digital payments and remote working technologies; how reconfigurations of (global) supply chains; how the likely change in competition (as industrial concentration through M & A will increase) - will affect the productivity distribution both positively and negatively. Looking in particular at how the 2008-09 recession impacted on these factors, and predicting likely changes due to COVID19, will be the main empirical approach used.

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Richard Harris

This chapter concentrates on what we know and, more importantly, on what is still needed in terms of further work, with regards to issues of investment in determining (total factor and labour) productivity. Thus, inter alia, it covers the importance of inward (and outward) foreign direct investment (FDI), in terms of its impact on UK productivity; as well as exports and imports in driving productivity; and access to finance, including firm investment in physical and intangible capital. FDI and trade allow firms to update production techniques and introduce new and better products, while access to finance and new investments in physical and intangible capital facilitate the incorporation of more ‘knowledge’ and ‘dynamic capabilities’ into the firm. This chapter also covers the particular and important role that geography has in understanding productivity issues, both from the perspective that different areas have different ‘mixes’ of firms with different productivity distributions, affecting average productivity levels in those areas, and that spatial location itself matters because of the potential for agglomeration effects and knowledge ‘spillovers’.

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Richard Harris

This chapter presents an overview of various models of regional growth that have appeared in the literature in the last 40 years. It considers the past, and therefore supply-side models such as the standard neoclassical, juxtaposed against essentially demand-side approaches such as the export-base and cumulative causation models (as integrated into the Kaldorian approach); before moving on to the present and more recent versions of the neoclassical model involving spatial weights and ‘convergence clubs’, as well as New Economic Geography core_periphery models, and the ‘innovation systems’ approach. A key feature of the more recent literature is an attempt to explicitly include spatial factors into the model, and thus there is a renewed emphasis on agglomeration economies and spillovers. The discussion of ‘present’ and ‘future’ approaches to regional growth overlaps with the current emphasis in the literature on the importance of more intangible factors such as the role of knowledge and its influence on growth. Lastly, there is a discussion of the greater emphasis that needs to be placed at the micro level when considering what drives growth, and thus factors such as inter alia firm heterogeneity, entrepreneurship and absorptive capacity. Recent micro-level evidence is also presented and related to the earlier discussion of the various models of regional growth.

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Richard Harris and Renee Reid

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Mariluz Mate-Sanchez-Val and Richard Harris