Are cities the real engines of growth in the EU?

Abstract This paper investigates whether the higher productivity of metropolitan regions in the EU reflects stronger recent growth dynamics or the persistence of historical advantages. The study focuses on the difference between capital metropolitan, other metropolitan, and non-metropolitan regions. A ten-sector shift-share decomposition using new and more detailed ARDECO data is combined with a descriptive regression framework to show which factors are associated with productivity growth. Capital metros consistently display the highest levels and growth rates of labour productivity. Other metro regions, however, have above average productivity, but below average productivity growth over the past two decades. In contrast, non-metro regions have reduced their productivity gap. Across all regional typologies, within-sector productivity improvements represent the dominant source of growth. The regressions show that initial low productivity, capital-region status, population density, patenting activity, employment shares in ICT-related activities and construction, and transport infrastructure quality are positively associated with productivity growth.