| Summary: | This paper investigates the main determinants of economic perfor-
mance in the EU from a regional perspective, covering 253 regions over
the period 2001-2008. In addition to the traditional determinants of eco-
nomic performance, measured by GDP per capita, the analysis accounts
for spatial e¤ects related to externalities from neighbouring regions. The
spatial Durbin random-e¤ect panel speci
cation captures spatial feedback
e¤ects from the neighbours through spatially lagged dependent and inde-
pendent variables. Social-economic environment and traditional determi-
nants of GDP per capita (distance from innovation frontier, physical and
human capital and innovation) are found to be signi
cant. Overall, our
ndings con
rm the signi
cance of spatial spillovers, as business invest-
ment and human capital of neighbouring regions have a positive impact
both direct and indirect on economic performance of a given region.
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