Investigating the Factors Driving Scotland’s Productivity Gap with International Countries

First, we investigate differences in levels of productivity between Scotland and close comparators, implementing a levels accounting framework. We show what are the main factors explaining long-standing differences between Scotland and pertinent European regions.  Second, we employ a dynamic growth accounting approach to map the sources of regional productivity growth in the last fifteen years. We aim to understand better what are the elements mostly limiting Scotland’s productivity resurgence, which can be important forces elsewhere. While this type of framework does not allow us to address causality, it is a powerful accounting tool and has been employed extensively in the empirical literature to explain cross-country and cross-industry productivity differences.  In addition we employ an econometric framework to try to address causality issues, investigating what are the factors driving Total Factor Productivity differences across regions. We highlight the role of education and R&D investment and explore in more detail how they can help growth given conditional factors such as distance to technology frontier.