We develop an empirical approach to examine static and dynamic knowledge externalities in the context of a regional total factor productivity relationship. Static externalities refer to current period scale or industry-size effects which have been labeled localization externalities or...

This paper explores the contribution of knowledge capital to total factor productivity differences among regions within a regression framework. We provide an econometric derivation of the relationship and show that the presence of latent/unobservable regional knowledge capital leads to a model...