Do innovation and human capital actually narrow the technology gap? Champions and laggards of European regional productive performance

Abstract

ABSTRACT This paper studies regional productive performance differentials among 243 NUTS-2 European regions for the period 2003–11. Within the last two decades the technology gap between European regions has increased considerably. Building on previous studies that have used data envelopment analysis (DEA) and which have neglected national production structures and pre-existing technological heterogeneity, we examine differences in regional productive performance by using a meta-frontier framework. Our findings confirm significant differences in productive performance across European regions and a large North–South technology gap. A panel vector autoregression (PVAR) shows that this regional technology gap can be attributed to differences in human capital and innovation activity.