Spatial inequality in the European Union: does regional efficiency matter?

This paper examines the sources of spatial disparities in output per capita across the European regions over the period 1986-2004. To this end, a decomposition of the Theil's second measure of inequality is used. The analysis carried out shows the important role played by labour productivity in determining the degree of dispersion in output per capita within the European Union. In turn, our results reveal the relative importance of regional differences in the levels of technical efficiency when it comes to explaining spatial disparities in labour productivity.