Addressing spatial dependence when estimating technical efficiency: A spatialized data envelopment analysis of regional productive performance in the European Union

Applying a spatialized data envelopment analysis, this paper estimates and analyzes the efficiency of European Union NUTS-2 regions during the period 2000-2014. The space-dependent efficiency scores estimated with the proposed model show a bimodal distribution that is not detected by the aspatial approach. The results confirm the crucial role of location of production units, offering important new insights on both the causes of regional disparities in labor productivity and the observed polarization of the European distribution of per capita income. The findings further suggest significant differences for the two subgroups (spatial clusters) of regional economies found in the correlation analysis between the efficiency scores and the components of the EU Regional Competitiveness Index. Consequently, policies suitable for one group of regions may not be suitable or appropriate for the other.