Abstract

This paper examines the effect of the quality of regional government (QoG) on firm Total Factor Productivity (TFP) in a multi-country context. The analysis is based on comparable cross-country data of manufacturing firms operating in seven European countries. To disentangle internal from external productivity drivers, the multilevel approach is employed. Results show that firms’ characteristics are important but external factors also play a role. As regards the specific scope of this paper, the results provide evidence that institutional differences within countries do matter for firm performance. The attempts made to address endogeneity problems confirm the positive and significant impact of the quality of regional institutions on firm performance.

This work is licensed under a Creative Commons Attribution 4.0 License.