Total Factor Productivity, Health and Spatial Dependence in Some European Regions

This paper assesses the determinants of total factor productivities in 96 regions of EU15 and 27 regions of CEE, during 1999–2010 by considering R&D, human capital and infrastructure in a dynamic specification. We distinguish between private and public R&D and we consider the health component of human capital instead of the educational one, while estimating different models for the regions in EU15 and CEE. Although our main results point out that R&D is an important determinant of regional productivities in both EU15 and CEE, we find evidence solely for a strong public R&D impact on the productivities in the EU15 regions, robust to spatial dependence and different time frames. Health also has a positive impact on productivities, although its effect is less strong after the 2004 EU enlargement; while in the CEE regions, infrastructure appears to have a stable effect. Also, a conditional catch-up process to region-specific steady states seems to emerge in both EU15 and CEE regions.