Cycle, productivity, and efficiency: Evidence from the European regions

Gianluigi Coppola, Sergio Destefanis and Giulia Nunziante
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Gianluigi Coppola: University of Salerno
Sergio Destefanis: University of Salerno
Giulia Nunziante: Sapienza University of Rome

No 2025-04, Discussion Paper series in Regional Science & Economic Geography from Gran Sasso Science Institute, Social Sciences

Abstract: Most economists believe that cyclical factors do not impact on long-run total factor productivity. However, the Kaldorian approach maintains the existence of a significant positive relationship, while the opposite view is held by some economists, sometimes defined as Schumpeterian. In this paper we shed light on this issue disentangling the impact of the cycle on the change of technical efficiency («catch-up») from the impact on technical progress. We carry out this empirical exercise for 267 NUTS2 European regions, computing a Malmquist index of total factor productivity throughout 1995-2016. We find that the Great Recession elicits catch-up, while decisively lowering technical progress. Overall, long-run TFP growth significantly falls during the slump. We also report evidence for region groups selected across various sample cuts. In the samples dominated by regions belonging to new Member States, there is little catch-up due to the slump, and the Great Recession strongly reduces long-run TFP growth. There is also a group of low growth regions whose TFP growth is relatively insensitive to demand fluctuations.

Keywords: catch-up; technical progress; Malmquist index; creative destruction (search for similar items in EconPapers)
JEL-codes: O43 O47 R11 R53 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2025-02, Revised 2025-02
New Economics Papers: this item is included in nep-eec and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:ahy:wpaper:wp66

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