Spatial and sectoral productivity convergence between European regions, 1975-2000

This paper introduces the appropriate econometric methodology and statistical tests to evaluate the spatial and sectoral stability of the labour productivity convergence process of 145 European regions over 1975-2000. Our results display significant σ-convergence only in aggregate labour productivity and in the services sectors among peripheral regions. We also show that omitting spatial effects leads to biased measures of σ-convergence. We then estimate a pooled β-convergence model including spatial autocorrelation and sectoral differentiation. Spatial and sectoral stability tests reveal which sectors display a convergence process and in which regime they are located.