6. Concluding remarks
Using a knowledge production function, the paper estimates the contribution of knowledge and human capital stocks on total factor productivity in European sub-national regions. Since total factor productivity in European regions appears to exhibit strong spatial autocorrelation, we employ a spatial Durbin panel model for the period of 2000–2010 to explicitly account for spatial dependence in the dataset. Moreover, these spatial econometric frameworks allow for the quantification of spillover effects of knowledge and human capital stocks on total factor productivity. Special emphasis is laid on the estimation of knowledge spillovers between Eastern and Western European regions. Based on its unique geographical closeness among European regions, an empirical illustration focuses on the triangle of capital city regions Vienna-Bratislava-Budapest. The empirical results show that the transmission of knowledge in the area–despite support from EU cohesion policy–is still somewhat restricted. Bratislava appears to be far more dependent on knowledge accumulated in Vienna than in other EU regions. To the contrary, Budapest’s productivity seems more responsive to knowledge and human capital endowments from other EU regions than Vienna.
