Green growth efficiency in Europe: Fresh insights from stochastic frontier panel data models

This study evaluates green growth efficiency in 37 European economies over the period 1990–2023 using panel stochastic frontier analysis. Three complementary specifications are estimated: a random-effects model, a time-invariant stochastic frontier model, and a time-varying decay stochastic frontier model. As a robustness check, the production frontier is re-estimated under the four-component panel specification of Kumbhakar et al. (2014), which separately identifies persistent inefficiency from legitimate country heterogeneity. The contemporaneous elasticity of output with respect to renewable energy consumption is statistically indistinguishable from zero in all specifications under bootstrap inference. Technical inefficiency declines systematically over the sample period, at an average annual rate of 1.24%, implying a 53.5% relative improvement in cross-country mean efficiency between 1990 and 2023. The four-component decomposition further shows that cross-country dispersion in green-growth efficiency is overwhelmingly persistent (structural) rather than transitory. Norway, Ireland, and Luxembourg rank highest in green growth efficiency under the time-varying decay model, whereas Ukraine, Azerbaijan, and North Macedonia rank lowest. Overall, the findings reframe renewable energy as a structural factor whose growth dividend materializes primarily through cumulative efficiency improvements rather than through a contemporaneous input-elasticity channel, with important implications for differentiated regional climate policy.