The effect of congestion and agglomeration on multifactor productivity growth in Dutch regions

Abstract

It is well known that labour productivity growth in Europe is slowing down, against an increasing growth rate in the US. The Netherlands is one of the countries in Europe with the lowest growth rates of productivity. This article looks at this phenomenon from a regional perspective and presents the results of a growth accounting exercise applied to regional industry data of The Netherlands between 1995 and 2002. We find that slow productivity growth in The Netherlands is particularly situated in the economic core regions and is caused by slow multifactor productivity (mfp) growth. A substantial part of this slow mfp-growth can be explained by the fact that positive agglomeration advantages are overruled by negative congestion effects caused by traffic jams.

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