Productivity Growth and Spillovers across European and American Industries: A Global Value Perspective Based on EU KLEMS

The development of production networks has promoted knowledge flows and technology diffusion among industries over the past decades, which affects the productivity growth for countries within these networks. This article examines productivity growth in the presence of inter-sectoral linkages. We construct a spatial production model with technological spillovers and productivity growth heterogeneity at the industry-level. We use the global value chain (GVC) linkages from inter-country input-output tables to model the technological interdependence among industries, and estimate total factor productivity (TFP) growth and its spillover among European countries. We find that the spillover effects from intermediate inputs are significant. There is a network effect of TFP growth from one country to another through input-output linkages. We provide a better understanding of the impact of spillover effects on TFP growth in the context of GVCs.