We investigate the main sources of heterogeneity in regional efficiency. We estimate a translog stochastic-frontier production function in the analysis of Spanish regions in the period 1964–96, to attempt to measure and explain changes in technical efficiency. Our results confirm that regional inefficiency is significantly and positively correlated with the ratio of public capital to private capital. The proportion of service industries in private capital, the proportion of public capital devoted to transport infrastructures, the industrial specialization, and spatial spillovers from transport infrastructures in neighbouring regions significantly contributed to improving regional efficiency.
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