Beyond efficiency: Quality of Government and eco-productivity convergence in the EU

Abstract

This paper examines eco-productivity convergence across European Union regions while explicitly incorporating institutional quality within a multilevel governance framework. Using a panel of 216 NUTS-2 regions over the period 2010–2023, we analyse whether regions converge in their ability to generate economic output while limiting environmental pressures, and whether the estimated convergence patterns differ once both national and regional Quality of Government (QoG) are taken into account. Eco-productivity is measured using a nonparametric frontier approach based on Data Envelopment Analysis, with labour and capital as inputs, GDP as a desirable output, and Greenhouse Gas (GHG) emissions, transformed into an output-oriented ‘GHG savings’ indicator. The results show that average eco-productivity levels are around 8% higher when QoG is accounted for, cross-regional dispersion is considerably lower, and $\beta$-convergence is consistently stronger and statistically significant across all subperiods. Overall, eco-productivity convergence is associated with QoG, suggesting that sustainable regional catch-up is more likely where green investment is matched by improvements in institutional quality.