Productivity slowdown and regional productivity heterogeneity

This paper examines the productivity slowdown by analyzing the degree, leverage, and spatial patterns of productivity improvements and spillovers in regions of France, Germany, Italy, and Spain. The analysis covers the Global Financial Crisis (2007–2012) as well as the pre-crisis (2002–2007) and post-crisis (2012–2017) periods. Using the Metafrontier Malmquist Productivity approach with robust estimators, the study conceptualizes technological shifts and diffusion networks within both endogenous and exogenous regional environments. Findings show that changes in technical efficiency have a short-term positive effect on regional growth, while technical change affects growth through initial conditions and path dependency. Regional productivity shifted from improving within-country resource allocation via endogenous factors enhancing the exogenous operating environment. However, unlocking a region’s full productivity potential depends on factors beyond its development level. Diffusion networks for efficiency and technological advancements exhibit limited dynamism and region-specific characteristics. In some cases, productivity growth in one region negatively affects neighboring regions. Spillovers from efficiency improvements occur partially among regions with closer technological proximity, especially during crises. These insights offer important policy implications for fostering regional productivity and addressing uneven development.