Service industry and cumulative growth in the Regions of Europe

Regional convergence in Europe has often been documented in the literature. Its measurement relies most of the time on per capita GDP data of which dynamics are assumed to follow the theoretics of the neoclassical approach. In this paper, we propose to adopt another approach because the previous one does not consider the presence of increasing returns to scale at the origin of agglomeration and increasing disparities among regions. In that purpose, we find more appropriate to base our estimation of regional convergence on the model developed by Verdoorn (1949). Because interregional relationships matter and services is now the most growth-enhancing sector, we perform a spatial econometric estimation of labor productivity in that particular sector for the EU15. Our conclusions bring new insights in the identification of the dynamics of regional convergence.