Scotland's productivity gap with international countries: research

Conclusion

The research finds that Scotland's labour productivity gap with the top performing EU comparator region was close to 30% over the period analysed, and there are productivity gaps across all of capital, labour quality and TFP.

Over the period, capital accumulation and TFP improvements have accounted for all of Scotland's labour productivity growth, but changes in labour quality appear to have had an almost negligible effect in this analysis. It must be noted, however, that the data issues with the measure used must be taken into account and that conclusions from this information require careful nuance.

Whilst FDI is a prominent source of capital flows, its contribution to TFP was not observed in the analysis. Conversely, R&D had a significant and strong direct effect on Scotland's TFP growth, more so than other regions.

Improvements in human capital appear to affect TFP indirectly by facilitating knowledge and technology transfers from leading firms to less advanced firms, which could have significant consequences for Scotland's "long tail".

Management practices could have a sizeable effect on productivity, but data was not available to compare this at an international level.