Regional Productivity Differences in the European Union Theoretical predictions and empirical evidence Kurt Geppert, Martin Gornig, Andreas Stephan (German Institute for Economic Research, DIW Berlin) Abstract There has been a long tradition of empirical analysis of regional productivity, particularly with refer- ence to the neo-classical theory of growth. Our panel data and analyses based on a covariance model show that regional productivity differences are also determined by time-invariant factors that have to date been largely neglected. These include the degree of agglomeration and the geo-economic location described in the New Economic Geography. The economic performance of the regions in Europe is, however, determined to a far greater extent by national productivity regimes. In light of the histori- cally strong influence of the national states this result may not come as a surprise. What is surprising is the fact that the role of the national states has not decreased over time, despite intensive integration efforts (European Single Market, Economic and Monetary Union). JEL classifications: R11, O47, C33 1