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

Author

Listed:
  • Gianluigi Coppola

    (University of Salerno)

  • Sergio Destefanis

    (University of Salerno)

  • Giulia Nunziante

    (Sapienza University of Rome)

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.

Suggested Citation

  • Gianluigi Coppola & Sergio Destefanis & Giulia Nunziante, 2026. "Cycle, productivity, and efficiency: Evidence from the European regions," Discussion Paper series in Regional Science & Economic Geography 2025-04, Gran Sasso Science Institute, Social Sciences, revised Feb 2026.
    • Handle: RePEc:ahy:wpaper:wp66
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    Keywords

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    JEL classification:

    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R53 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Public Facility Location Analysis; Public Investment and Capital Stock

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