European countries’ competitiveness and productive performance evolution: unraveling the complexity in a heterogeneity context

This paper is developed around two major arguments. First, the European Country Specific Industrial Structures (CSIS) technology gap defined in a metafrontier framework, captures the productive performance of the examined European CSIS conditional on the country-specificities, and therefore mirrors the micro-component of country competitiveness. Second, the evolution patterns of technology gaps, incorporating a time varying and group specific path dependence process as well as the features of the corresponding growth curve, reflect the contribution of the micro-component on the foundational country competitiveness. We use a balanced panel dataset that includes thirteen industries from seventeen European countries industries covering an 8 year period and employ a two stage approach. First, we employ a metafrontier framework for the estimation of productive performance and, at a second stage, we adopt and further develop a Growth Mixture Autoregressive Latent Trajectory model. This empirical strategy allows for the identification of heterogeneous groups with respect to the evolution patterns and for the consideration of group specific and time varying path dependence of European CSIS technology gaps evolution patterns. Empirical findings confirm the existence of two distinct groups that, over time, become more divergent but also more concentrated around their center. Finally, empirical evidence suggests that the micro component of foundational competitiveness, captured by CSIS technology gaps evolution patterns, exerts a differential impact on EU country overall foundational competitiveness.