The Evolution of Regional Productivity Disparities in the European Union from 1975 to 2002: A Combination of Shift–Share and Spatial Econometrics

Abstract

Le Gallo J. and Kamarianakis Y. The evolution of regional productivity disparities in the European Union from 1975 to 2002: a combination of shift–share and spatial econometrics, Regional Studies. This paper evaluates the relative significance of the key factors that underlie regional productivity disparities in the European Union: industry mix and structural regional differences. Shift–share decomposition is performed and the outcomes are investigated with exploratory spatial analysis and space–time econometric models. Substantial changes in the spatial patterns of productivity and its determinants can be observed during the study period. Results indicate a decrease in geographical clustering for productivity and both regional and sectoral factors. Spatio-temporal dependencies are essential for correct model specification as their omission results in an overestimation of the effect of the industry mix.