Cultural and innovation pathways to productivity in Romania’s Trans-Balkan regions

This study investigates the role of innovation and cultural environment on regional economic productivity across Romanian counties. Using a novel dataset with county-level patent data and a composite cultural indicator - derived through principal component analysis of tangible cultural amenities and proximity to the East Trans-Balkan cultural corridor - we assess how both factors affect the regional economic productivity proxied by the gross value added per employee. Building on an extension of the spatial Mankiw-Romer-Weil model, by employing a spatial lag of X (SLX) model to account for spatial spillovers, we find that both innovation and cultural environment are significantly correlated with higher productivity. A one standard deviation increase in patents per employee is associated with an approximate 1 per cent rise in productivity, while the cultural index displays diminishing but consistently positive returns. The findings emphasise the transformative capacity of targeted investments in innovation and cultural infrastructure, particularly in regions seeking to overcome structural economic disadvantages.