Regional convergence in Europe and the industry mix: A shift-share analysis

Abstract

In this paper we try to elucidate the extent to which existing interregional inequality in aggregate productivities per worker within the European Union can be attributed to differences in the sectoral composition of activities, rather than to productivity gaps that are uniform across sectors. To this effect we use the shift-share analysis and show that regional specialization has a very minor role and that interregional differences can essentially be explained by uniform productivity gaps only. Our empirical results turn out to be statistically very significant and robust to different definitions of Gross Value Added (market prices and factor costs), different degrees of sectoral breakdowns, dates and alternative sets of countries. Our findings thus provide support to regional development policies focusing on actions producing uniform increases in regional productivities, such as infrastructures and human capital. (C) 2000 Elsevier Science B.V. All rights reserved.