Abstract
This paper investigates the main determinants of economic perfor-mance in the EU from a regional perspective, covering 253 regions overthe period 2001-2008. In addition to the traditional determinants of eco-nomic performance, measured by GDP per capita, the analysis accountsfor spatial e¤ects related to externalities from neighbouring regions. Thespatial Durbin random-e¤ect panel speci cation captures spatial feedbacke¤ects from the neighbours through spatially lagged dependent and inde-pendent variables. Social-economic environment and traditional determi-nants of GDP per capita (distance from innovation frontier, physical andhuman capital and innovation) are found to be signi cant. Overall, our ndings con rm the signi cance of spatial spillovers, as business invest-ment and human capital of neighbouring regions have a positive impactboth direct and indirect on economic performance of a given region.
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