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SARS-CoV-2 uses human beings as means of transport. In addition to the general issue that fewer interpersonal contacts reduce the speed of contagion, less attention has been paid to the spatial configuration of such contacts. With respect to Italy, the virus severely affected the most industrialized area of the country, where the high density of economic activities also exhibits dense networks of commuting flows. In this article, we empirically investigate the relationship between the spatial extent of local labour markets, as defined by the structure of the commuting network, and the diffusion of COVID-19. To this end, we compute, for each municipality, the intensive and extensive margins of commuting flows and we measure the spread of the disease by considering excess mortality over the period of January-May 2020. By exploiting a rich and novel dataset, we find that the commuting network played a significant role in placing more connected places at more severe epidemiological risk. A back-of-the-envelope calculation suggests that if commuting patterns were 90% of the real ones, Italy would have suffered approximately 1 300 and 1 000 fewer fatalities in March and April, respectively.

How global warming affects human development is a central question for economists as well as social scientists. While most of the literature has focused on the impact of weather on income, less is known on the relationship between climate and local human development. This paper considers shocks in precipitation, temperature, and an original measure of soil aridity to first exploit the association between climate warming and human development, and second, on its dimensions. We show that while precipitations do not have a significant long-term impact on human development growth, variations in temperature and potential evapotranspiration negatively affect two of the three determinants of the Human Development Index, namely life expectancy at birth and education. These results suggest that other climate indicators, such as the potential evapo-transpiration of the soil, should be considered in addition to the standard indicators, when evaluating the localized economic effects of climate change.

In Italy, in 2011, the Superbollo tax was introduced for newly registered cars exceeding 225 kW (later reduced to 185 kW). Although the aim of the tax was not to decrease CO2 emissions but to increase government revenues in a time of economic crisis, we show that it had significant and unintended impacts on buyers’ behaviour. Using data related to vehicles registered between 2008 and 2017 and a difference-in-difference and regression discontinuity design (RDD) framework, we find that the Superbollo had an important role in reducing CO2 emissions and in increasing the share of cars with low CO2 emissions. In particular, we show that the introduction of the Superbollo has shifted consumers towards greener, though not necessarily less energy-intensive cars (e.g., battery electric cars), resulting in a reduction of CO2 emissions per kilometre driven by newly registered cars with engine power between 150 and 200 kW by an order of magnitude of 5–8% and a reduction of kW by 1–4%.

The aim of this short communication is to estimate the effects of the implementation of more restrictive lockdown measures on pollution levels in Italy. Using a time series of weekly concentrations of PM10, PM2.5 and NO2 for the period 2016–2020 across 71 provinces, we find that the introduction of lockdown measures reduced the air concentration levels of PM10 and NO2 by 17–18%, while their effect on PM2.5 remains unclear. These results indicate that the lockdown had a significant positive impact in terms of lives saved and improved air quality.

For many governments, enacting green policies is a priority, but such policies often impose on citizens substantial and uneven costs. How does the introduction of green policies affect voting? We study this question in the context of a major ban on polluting cars introduced in Milan, which was strongly opposed by the populist right party Lega. Using several inferential strategies, we show that owners of banned vehicles—who incurred a median loss of €3,750—were significantly more likely to vote for Lega in the subsequent elections. Our analysis indicates that this electoral change did not stem from a broader shift against environmentalism, but rather from disaffection with the policy’s uneven pocketbook implications. In line with this pattern, recipients of compensation from the local government were not more likely to switch to Lega. The findings highlight the central importance of distributive consequences in shaping the political ramifications of green policies.

Within the much broader framework of global interest, the dilemma concerning the real impact of mode of transport on the spread of COVID-19 has been a priority for transport stakeholders and policy-makers. How dangerous is it to move around a certain territory? Does the danger depend on the mode of transport? By considering a novel and detailed dataset at the level of local labour markets, we analysed the spatial association between the pre-pandemic propensity to use public transport and excess mortality in Italy attributable to the initial spread of COVID-19. We found that places characterised by larger commuting flows exhibit higher excess mortality during the first wave of the pandemic, but observed no significant spatial association between excess mortality and transit usage. Our results were obtained by considering a wide range of heterogeneity in the estimation of quantile regressions across a variety of specifications. Although we do not provide a definitive answer concerning the risk associated with transit use, our analysis suggests that mobility, not modal choice, should be considered a main driver of the initial contagion.

The paper analyses the political economy that characterized the design and implementation of a particular place-based policy aimed at addressing wealth inequality, that is, land reform. It focuses ...

The aim of this paper is to identify the environmental impact induced by behavioral responses to terrorist attacks occurred in London on July 7th, 2005. By relying on the “dread hypothesis” and on the evidence of an increase in private transport subsequent attacks, we have estimated econometric models of pollution concentration. Our results point at a substantial environmental impact in terms of PM10 and NO2, possibly driven by an increase in the perception of higher safety of private transport with respect to public transit. Results are robust to several robustness checks, including nonlinear time trends and heterogeneity across types of monitoring stations.

We examine the effects of human-induced desertification on economic growth by exploiting a 56 km-by-56 km grid-cell global dataset on the annual frequency from 1990–2015. We find that areas that experienced large soil aridification are associated with a reduction in GDP per capita. Our results indicate that from 1990–2015, aridification reduced the GDPs of African and Asian countries by 12% and 2.7%, respectively. Our estimates are robust to adding higher-order terms of geo-climatic variables and controlling for country-specific linear trends, which allows us to project future costs of desertification. Our findings show that desertification will generate losses in GDP growth by 16% and 6.7% in Africa and Asia, respectively.

Smart cities are characterised, among other things, by high levels of connectivity and relative availability of transport services. In this respect, airports play a crucial role as they provide a dense network of connections among major cities. While there is abundant literature on the social and economic impacts of airports and air transport operations in general, relatively less attention has been paid on the importance of connections between airports and the surrounding territory. Very often, and especially for major airports and hubs, the connection between the terminals and the city is secured by trains. In this paper, we propose a welfare analysis of the adoption of smart payment tools for trains serving airports. In particular, we focus on the possibility for passengers to pay with contactless cards, that is to use credit cards as sort of dematerialised tickets, instead of queuing at ticket desks or selling machines. This new tool has the advantage to save time and may induce individuals to use the train, with consequential benefits in terms of reduction in external costs. We conclude our paper with a broader policy discussion regarding the role of smart payment for transport services and associated business models.

In 2008, Utah launched a reform of working time for which workers in treated public agencies were allowed to compress workweek from 5 to 4 days, by extending working hours from 8 to 10 per day. This paper estimates the impact of the initiative on the consumption of fuel and on the production of CO2 by public fleets. By assembling a new dataset on 43 public agencies and by adopting a difference-in-difference framework, a contraction in the consumption of fuel by 2% and a 14% decrease in the generation of CO2 was found.

An increasing body of literature has found a positive and significant impact of airport activities on local economies. However, it is not clear whether this effect is driven by demand factors (passengers arriving and departing with their expenditure) or supply factors (accessibility provision for local firms). By considering the 2008 de-hubbing of Malpensa Airport as a natural experiment, we estimate the impact of a reduction in flight network connectivity on employment in the travel to work areas of Lombardia, Piemonte, Liguria and Emilia Romagna. The de-hubbing decision, in fact, permanently affected the intercontinental accessibility of the airport, with only a temporary effect in terms of passengers. We found that areas characterized by export-oriented sectors suffered from contraction in the degree of connectivity, which decreased as an effect, along with distance from the airport. No effect was found in urban areas and areas characterized by heavy industry sectors.

This paper aims to carry out a comprehensive cost-benefit analysis of the introduction of the Global Navigation Satellite System (GNSS) technologies into train control systems based on ERTMS (European standard) to increase the efficiency and safety of railway lines. To this end, the GNSS-based system is compared to other solutions along an appropriate time horizon. In our analysis, we consider several case studies from Italy and a range of benefit/cost ratios from 0.9 to 4.1 is found for the GNSS-based projects, depending on the different types of lines, their characteristics and their current endowment.

Recent international financial and banking crises highlight the geographical context of the spatial propagation of shocks, particularly given that the international diversification of portfolios was a driving force of the global contagion. A different scenario is presented through the empirical evidence in this chapter, which examines the crises that affected four major local banks in Italy: Cassa di Risparmio di Ferrara, Banca delle Marche, Cassa di Risparmio della Provincia di Chieti and Banca Popolare dell’Etruria e del Lazio. Here, a high spatial concentration of activities compromises stability: the geography of branches and loans and the loss of international competitiveness for export-orientated local economies results in financial unbalances and in the need for bail-outs. A geographical analysis of these banking crises in Italy underscores the perils of low spatial diversification in banking.

This article aims to analyse the effects of plague on the long‐term development of Italian cities, with particular attention to the 1629–30 epidemic. By using a new dataset on plague mortality rates in 56 cities covering the period c. 1575–1700, an economic geography model verifying the existence of multiple equilibria is estimated. It is found that cities severely affected by the 1629–30 plague were displaced to a lower growth path. It is also found that plague caused long‐lasting damage to the size of Italian urban populations and to urbanization rates. These findings support the hypothesis that seventeenth‐century plagues played a fundamental role in triggering the process of relative decline of the Italian economies.

Road pricing (the Ecopass) was introduced in Milan in January 2008 with the aim of reducing pollution. The existing literature has argued for a sizeable effect of the charge in reducing pollution in the short term, although long-term effects are less clear. This paper aims to propose a formal test of the impact of the Ecopass in the long term by using a novel methodology which combines regression discontinuity with propensity score matching. Results confirm the poor performance of the policy within 90 days to one year (depending on the pollutant) after introduction.

The impact of European Cohesion Policy in urban and rural regions. Regional Studies. This paper presents an evaluation exercise on the impact of European Cohesion Policy on the economic performance of the most disadvantaged European areas (Objective 1 regions) for the programming period 2000–06. By performing the analysis at NUTS-3 rather than NUTS-2 level to exploit the exogeneity of the treatment status in the context of a regression discontinuity design (RDD), the analysis shows that European Cohesion funds have positively contributed to generating economic growth in lagging areas. However, their effect is mainly driven by the successful performance of rural areas close to the main urban agglomerates. Favourable geography and the progressive suburbanization of the rural landscape created new opportunities for rural areas close to cities, thus boosting the effect of the policy.

Recent waves of immigration flows and asylum seekers are posing serious social and political problems in European countries. Between 2009 and 2015, it has been estimated a total of 3–3.5 millions of asylum applications to national governments. This chapter discusses the geography of asylum seekers in the European Union and proposes some descriptive statistics concerning the behavioral reaction of residents. In particular, it is shown a strong correlation between the size of the population of asylum seekers and the fear of terrorism and crime, whereas no economic concern was found. This evidence is interpreted as need to provide also correct information to residents when implementing immigration policies.

The role of wealth inequality for local development has long been neglected, although some literature has pointed out its relevance in explaining entrepreneurial and education investment. Among the typologies of assets composing individuals’ wealth, land is of paramount importance in underdeveloped economies specialised in agriculture. Land reforms in terms of redistribution of land ownership are hence expected to boost development through an increase in entrepreneurship rate and human capital stock. In this paper, we consider land reform in Italy, which took place in the 1950s in specific areas across the country. By adopting an Oaxaca-Blinder regression method and using data at a city level on the implementation of the reform for Puglia–Basilicata–Molise in the South of Italy and, as robustness checks, for Maremma in the Centre and Delta del Po in the North of Italy, we have found a positive impact of land redistribution on human capital accumulation and a less significant impact on employment and firm location.

This paper investigates the institutional and socioeconomic determinants of the location of asylum seekers in the case of Italy, where a complex multilevel system of hosting has been established to address the pressure of arrivals. In this system, asylum seekers are allocated to local communities through periodic calls (i.e., with a bottom-up procedure where communities bid for them). This results in an interesting circumstance in which local attitudes can be studied in relation to cultural and political values and economic opportunities. The econometric analysis explores the economic, social and political drivers of such redistribution, finding that social capital is negatively related to the willingness to host asylum seekers, probably due to the desire to maintain cohesive communities.

This paper aims to evaluate the effects of a road pricing scheme in Milan (the Ecopass) on accidents. As the policy was introduced in January 2008, we exploit this exogenous variation to analyse the trend of the time series of the number of accidents, the number of injuries and deaths and in different areas through a regression discontinuity design approach. We find evidence of an overall reduction in accidents in the whole city ( $$-$$ 16 %), with a more pronounced effect in the treated area ( $$-$$ 18.8 %). The effect on severity of accidents is limited as only a significant reduction in the number of injuries could be detected, whereas no effect was found for the number of deaths.

Entrepreneurship is considered to be one of the most important engines of growth, and its determinants are widely investigated. Several theories of entrepreneurship have been proposed and tested in the literature, most of them focusing on “hard factors,” i.e., determinants related to the quality/quantity of inputs and to the size of the market. In this paper, I investigate how the interaction between hard and soft factors may shape the entrepreneurial behavior of individuals. In particular, the aim of the paper is to explore the links among the structure of the family, land inequality at the beginning of the twentieth century, and subsequent entrepreneurship in Italian provinces. Using a novel data set on the Gini coefficient of land inequality in 1931, sharecropping in 1911, and the classification of family structures in 1950, I test their relevance to explaining entrepreneurship. I find that high land concentration with strong family ties reduces the probability of becoming an entrepreneur. Furthermore, the diffusion of sharecropping contracts is associated with higher entrepreneurship rates. Taken together, these results point to a central role played by the organization of agriculture in promoting entrepreneurship.

In this article, we analyse the mechanisms of agenda setting by focusing on the determinants of individual attitudes towards crime and investigating the role played by the media. After a brief literature review supporting the relevance of the selected topic of inquiry and the presentation of our analytical framework, we study the persuasion effects of mass media. More specifically, we investigate how TV exposure can shape individual perceptions of specific issues such as crime, and then focus on the effects of exposure to crime news on voting decisions. Using the Italian 2001 general election as an important case study of TV power concentration, we provide evidence that media-induced agenda setting enhanced the salience of the crime issue in voters’ minds during the 2001 Italian general election and contributed to the victory of the coalition led by Silvio Berlusconi. Interestingly, our results are partially driven by the switch of previous left-wing voters to voting for the centre right because of exposure to crime news.

In recent decades, owing to a series of public debt crises and constraints on government expenditure, infrastructure investment has dropped significantly in both developed and developing countries. To counterbalance this trend, Public–Private Partnerships (PPPs) schemes have been increasingly adopted. In this paper, we explore the determinants of the degree of private participation in transport infrastructure projects in a large sample of developing countries. By using a large sample of transport projects included in the World Bank Private Participation in Infrastructure Projects database, we document that greater participation by private parties in PPP contracts is associated with better institutions in terms of lower corruption, civil freedom, and a better regulatory framework.

L’occupazione delle terre in Basilicata: determinanti politiche ed economiche Una vasta letteratura ha analizzato le lotte civili e le guerre etniche nei paesi in via di sviluppo addivenendo alla conclusione che l’ineguale distribuzione del reddito e certamente da annoverarsi tra le cause principali. Relativamente minore attenzione hanno ricevuto le lotte contadine per la redistribuzione della terra, fenomeno che ha caratterizzato l’Italia dell’immediato dopoguerra. Il presente saggio intende analizzare da un punto di vista strettamente quantitativo l’occupazione delle terre avvenuta in Basilicata intorno al 1949-1950. L’analisi econometrica dimostra che la diseguaglianza nella distribuzione della terra fu tra le principali determinanti, unitamente alla forza del Partito comunista, che agi da coordinatore delle rivolte

Malaria is thought to be strictly related to underdevelopment and poverty, and its geographically related origin is now widely recognized. That is, it is endemic only in certain areas of the globe, with environmental and climatic characteristics that are ideal for the proliferation of mosquitoes, which are the vector for transmitting the disease. This feature is the main reason why a large body of economic literature uses mortality from malaria as a proxy with which to measure the effect of geography on human outcomes. Cases of eradication are being scrutinized by scholars to determine the socioeconomic impacts of malaria. Among the various malaria parasites, the worst, Plasmodium falciparum, infested Italian regions for centuries until its eradication in the period 1945-50. This article presents an empirical assessment of the economic outcomes of the eradication of malaria in the Italian regions by exploiting the spatial variation in mortality rates. I found support for the hypothesis that the eradication of malaria increases human capital in the long run. In particular, I found that eradication increased the years of schooling by about 0.3 years, although my evidence suggests a greater effect on males than on females. Moreover, I found support for a long-run impact of eradication actions that operated through an intergenerational spillover effect and accounted for about 0.07 years of schooling. [ABSTRACT FROM AUTHOR]

type="main" xml:lang="es"> En los ultimos anos, un creciente cuerpo de literatura ha comenzado a considerar la posible presencia de una dependencia de la trayectoria en los procesos de desarrollo de los paises. Este fenomeno siempre ha sido reconocido en los estudios regionales y urbanos, porque la trayectoria del desarrollo sigue casi de manera natural una difusion espacial dependiente de la historia e influida por la geografia fisica y la calidad de las instituciones. En este articulo, considero el caso de la concentracion de empresas y empleo en Italia, y su impacto en el desarrollo local. Una literatura copiosa, y en aumento, ha argumentado a favor de los efectos persistentes de las instituciones del pasado sobre los resultados actuales. Por lo tanto, con el fin de identificar el impacto de la densidad de empresas y empleo en los ingresos, he empleado instrumentos de la historia de un conjunto de ciudades italianas: a saber, la presencia de una universidad y su estatus como ciudades-estado independientes durante la Alta Edad Media. En primer lugar demuestro que esas dos variables tuvieron un efecto importante en el proceso de desarrollo urbano entre 1300 y 1861, junto con una serie de condiciones geograficas favorables. A continuacion, cuando empleo estos instrumentos para predecir la densidad de empresas y empleo, encuentro que la elasticidad de los ingresos de las empresas y el empleo se halla en un intervalo de 0,08 a 0,13. Este resultado se interpreta como un aporte de pruebas de la existencia de raices historicas de las economias de aglomeracion en Italia.

Impact of European Cohesion Policy on regional growth: does local economic structure matter? Regional Studies. A growing body of literature has analysed the effect of European Cohesion Policy on regional gross domestic product (GDP) growth. The paper contributes to this literature by discussing Structural Funds and assigning an explicit role to the choice of strategy and the economic structure of regions. In particular, adopting a regression discontinuity design with heterogeneous treatment and using data on NUTS-3 regions makes it possible to identify the causal impact of Structural Funds on regional growth according to the size of the service sector, a sector that accounts for a large share of total Structural Funds expenditure. The paper shows that the larger the sector, the greater the amount of financial resources directed to services and the slower is growth. The interpretation pertaining to policy implications is that higher growth rates can be obtained by promoting the service sector at its early stages, i.e., when it is comparatively small and its potential for productivity growth is higher.

Long-run and sustainable development is a main source of concern for contemporary cities. To address this issue, strategic plans have been introduced in several cities. In this paper, we investigate the determinants of strategic plan adoption in Italian cities by relying on the institutional collective action theory which predicts that collaboration among institutions is more likely to occur in areas with larger social capital stock and where public bodies share a common history of collaboration. Our econometric evidence shows that a larger stock of social capital and a history of past institutional collaboration increases the probability of adopting a strategic plan, confirming the central prediction of the institutional collective action theory.

Transport costs are widely considered as a key driver of competitive advantage of countries, regions and cities. Their relevance is even greater when scale economies are at work since production is concentrated and goods must be shipped. Recent literature has found that highways, by decreasing transport costs, are crucial in influencing agglomeration economies and ultimately urban development. In this article, we contribute to this literature by studying the effect of highway construction on the structure of local economies. In particular, we consider the effect of highways in Italian cities in terms of firm location by explicitly recognizing the pivotal role played by the transport sector and by intersectoral linkages in promoting development. The main research hypothesis is that the location of an highway exit in a given city attracts firms operating in the transport service sector and consequently transport-intensive firms. Our empirical evidence concerns Italian cities over the period 1951–2001 and exploits variation in employment, population and plants induced by the construction of the highway network. To deal with the endogeneity of the geography of highways exits, we propose as an instrument the geography of Roman roads. To this end, we have coded the whole network of Roman roads in Italy. We have found that the location of highway exits increases employment and the number of plants and that this growth is concentrated in transport service-intensive sectors. This result is robust to a number of checks, including eventual instrument non-validity and selection into treatment.

Percoco M. Health shocks and human capital accumulation: the case of Spanish flu in Italian regions, Regional Studies. The impact of health on economic development is a hotly debated issue in the economics literature, with most scholars supporting the idea that the diffusion of diseases is detrimental to development. In this context, pandemics are an important case study given their exogenous nature, which makes identification of the impact of diseases on development clearer than in other cases such as malaria or smallpox. This paper focuses on Spanish flu in Italy, one of the countries with the highest mortality rate due to the pandemic. By exploiting the regional variation in mortality and focusing on the hypothesis of the foetal origins of cognitive abilities, the long-run consequences of influenza exposure in terms of human capital accumulation are estimated. An average reduction of 0.3–0.4 years of schooling for the cohort born in 1918–20 is found. This result points to a small but persisting effect of health shocks on regional productivity through a variation in the rate of accumulation of human capital.

The aim of this article is to verify whether public investment in infrastructure is effective in terms of growth. While there is extensive literature analysing the effect of public capital stock on development and growth, comparatively less attention has been devoted to the contractual mechanisms characterising this investment. In this article, we focus on private participation in infrastructure projects through forms of public–private partnerships and verify whether the use of such contracts promotes economic growth. By analysing the performance of 81 developing countries over the period 1991–2008, we found that public–private partnerships are particularly relevant in terms of growth for high-income countries, whereas we could not find significant effect for low-income countries. We interpret this result as evidence of the relevance of better institutions, especially in terms of quality of regulation and rule of law, for attracting private investment in infrastructure projects and then for promoting growth.

The accuracy of ex ante project appraisal has been subject to scrutiny by scholars in recent years. It has often been claimed that the inaccuracy of project evaluation leads to a waste of public spending. In this article I acknowledge that the appraisal of a project consists in long-run predictions of several variables, so that the accuracy of ex ante evaluations should be assessed on the basis of forecasting rationality. I test for the rationality of a sample of World Bank project appraisals and find no significant discrepancy between ex ante and realized rates of return.

In this note we discuss the sensitivity analysis of the internal rates of return (IRR). We show that the use of partial derivatives can be misleading in the identification of key drivers of an investment project's performance. To remedy this shortcoming, we propose the use of an alternative sensitivity measure called the Differential Importance Measure. The analysis shows that, even if the theoretical conditions for using the Net Present Value or the IRR as valuation criteria apply, the sensitivity analysis results for the two indicators may differ.

Recent studies have highlighted the role of geography and institutions as key determinants of urban development. In this paper, we test this hypothesis by considering the case of Italian cities over a very long time period, i.e., from 1300 to 1861. Our measure of development is the urban population, and we relate it to geographical and institutional variables at both city and regional level. We find that the quality of institutions as measured by the experience of free city-state and the presence of a university has a positive effect on urban development, whereas we could not find a robust impact of the quality of regional government. However, we also find that cities located in mountain areas grew less than cities located in lowlands, possibly with access to the sea. We interpret these results as evidence of the importance of urban institutions and geography in shaping urban development.

Natural and man-made disasters are currently a source of major concern for contemporary societies. In order to understand their economic impacts, the inoperability input-output model has recently gained recognition among scholars. In a recent paper, Percoco (2006) has proposed an extension of the model to map the technologically most important sectors through so-called fields of influence. In the present note we aim to show that this importance measure also has a clear connection with local sensitivity analysis theory.

The aim of this note is to introduce the special issue on "Mega-projects and regional development in the Italian experience" and to review some of the critical issues associated with the evaluation of mega-projects. In particular, we focus on the shortcomings of Cost-Benefit Analysis when the project is large and when network effects are not negligible, and we propose further research on risk assessment and time discounting for long term and risky investments. Lo scopo della presente nota e quello di introdurre i saggi della special issue "Megaprogetti e sviluppo regionale nell’esperienza italiana" e porre in rassegna alcune delle tematiche principali, spesso associate alle grandi infrastrutture. In particolare, presenteremo alcune delle problematiche inerenti l’Analisi Costi-Benefici nel caso dei grandi progetti di investimento con rilevanti effetti di rete. Proporremo altresi delle direzioni di possibile ricerca futura in materia di valutazione dei rischi e di funzioni di sconto per il lungo periodo.

In this article, we present the results from a meta-analysis conducted over 44 experimental and field studies, which report individual discount rate estimates. We find in our research that the experimental design of a study has a decisive impact on these estimates, and conclude that meta-analysis, in the case of individual discount rates, has a low transfer value. © 2009 Taylor & Francis.

European regions have experienced a greater presence of service producers in their economy over the last few decades. Indeed, the manufacturing sector increasingly contracts out many activities to intermediate producer services. This is mostly because they are located close to each other and because services experience increasing returns to scale which reduce their marginal costs. In this paper, we propose to measure the extent to which productivity in services has converged across European regions. The model we use, originally developed by Verdoorn (1949), takes the increasing returns to scale explicitly into account. We apply spatial econometric techniques and control for border effects by introducing two different spatial weights matrices under the assumption that economic interactions decrease very substantially when a national border is passed. Furthermore, we take proper care of the presence of both types (spatial and non-spatial) of endogeneity by using spatial two stages least squares (Kelejian an...