Is cumulative growth in manufacturing productivity slowing down in the EU12 regions?

Abstract

The cumulative causation in the relation between labour productivity and output growth, known as Verdoorn's Law, is empirically tested using data from 109 EU12 regions during the period 1977-2005. Several specifications of Verdoorn's Law are put forward in this paper, which attribute the process of cumulative causation to a series of factors, including manufacturing agglomeration, spatial interaction, and responses to the problems of growth. The findings suggest that, although cumulative causation holds over this period, the slowdown of its pace is, nonetheless, apparent post 1992. Revisions in responses (e.g. policy) along with further research are thus recommended. © The Author 2009. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.