Centre for Efficiency and Productivity Analysis

The endogenous approach to regional development policy has become central over the last decade. By employing the conditional frontier approach, this paper investigates the relative contribution to labour productivity growth of: (1) capital accumulation, (2) exogenous technical change and efficiency, and (3) endogenous technological capabilities – i.e. innovation capability and human capital. We find overall convergence in labour productivity growth driven by capital accumulation and exogenous technical change, in 211 European regions in 18 countries over the period 1995-2007. Differences in terms of relative contribution arise concerning advanced regions vis-à-vis backward regions. As for the latter, productivity growth is mainly driven by capital accumulation, while the lack of convergence in terms of endogenous technological capabilities cast some doubts on the sustainability of the convergence process and suggest some implications for the European Cohesion policy.