Supply and Demand-Driven Spillovers and Productivity Growth

As information technology and globalization expand the horizons of economic agents’ production possibilities and decisions, interconnections between productive entities are likely not only expanding but having increasing impacts on production and productivity. Such spillovers may derive from various types of linkages, including those associated with time, space, and industry or sector. Productivity studies are however, typically based on economic models that preclude recognition of externalities or connections among economic entities, and resulting spillovers affecting economic performance. This paper overviews a conceptual basis for including various types of spillovers in cost and productivity analysis, the potential for building such mechanisms specifically into these analyses, and some evidence indicating the impacts of such inter-dependencies on exhibited economic performance. To be presented at a technical symposium at the Center for Japan-U.S. Business and Economic Studies and the NYU Stern School of Business, March 30, 2001. The author is a Professor in the Department of Agricultural Economics and member of the Giannini Foundation.