Working Paper: CEPR ID: DP4527
Authors: Patricia Rice; Anthony J. Venables
Abstract: This Paper uses NUTS3 sub-regional data for Great Britain to analyse the determinants of spatial variations in income and productivity. We decompose the spatial variation of earnings into a productivity effect and an occupational composition effect. For the former (but not the latter) we find a robust relationship with proximity to economic mass, suggesting that doubling the population of working age proximate to an area is associated with a 3.5% increase in productivity in the area. We measure proximity by travel time, and show that effects decline steeply with time, ceasing to be important beyond approximately 80 minutes.
Keywords: clustering; productivity; regional disparities
JEL Codes: O40; R10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Proximity to economic mass (R12) | Productivity (O49) |
| Doubling economic mass within a given area (R12) | Productivity (O49) |
| Travel time > 80 minutes (R41) | Productivity (O49) |
| Reduction in travel times across the UK (R41) | Average productivity (O49) |
| Proximity to economic mass (R12) | Productivity index (E23) |
| Variations in productivity (O49) | Occupational composition index (L70) |
| Spatial variance in earnings (J31) | Productivity differences (O49) |