Impact of regional selective assistance on sources of productivity growth: Plant-level evidence from UK manufacturing, 1990-98

Regional policy has been an enduring aspect of post-war industrial policy in the UK, based on a recognition of the need to reduce regional disparities in employment, earnings and the cost of living. Department of Trade and Industry (DTI) support schemes are designed to achieve a number of varying and occasionally conflicting objectives, but their overarching intention arguably must be to improve the economic performance of the plants they assist in order to increase productivity growth in the regions. Research into the sources of productivity growth has indicated that the entry and exit of plants plays a significant role, but also the reallocation of inputs from plants within the industry. This paper uses decomposition analysis to look at sources of total factor productivity growth for UK manufacturing plants, allowing for comparisons across regions, industries and between assisted and non-assisted plants, based on the Regional Selective Assistance scheme.