Abstract
Building on the Kumar and Russell (2002) methodology, we propose a conditional frontier approach which allows singling out the role of technology gap in explaining labour productivity differences. We find convergence in labour productivity growth driven by capital accumulation and technical change in 211 European regions in 18 countries over the period 1995‐2007. In lagging behind regions productivity growth is mainly driven by capital accumulation. The technology gap does not play a role in driving labour productivity growth and remains stable across regions in the considered period. Cohesion policy seems to be more effective in terms of fixed investment rather than on technological capabilities. Technology gap represents a source of unused potential productivity growth to be exploited in the future in order to substantiate economic convergence in Europe.
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