Beyond productivity: Does ICT agglomeration drive regional eco-efficiency?

The digital and green transitions are reshaping regional development strategies across Europe. However, little is known about the impact of ICT sector agglomeration on regional eco-efficiency. Moving beyond the common assumption of linear effects, we investigate whether the relationship is non-linear and how it varies along the core–periphery gradient. We measure eco-efficiency through the Global Malmquist-Luenberger index, which considers both economic output and CO2 emissions, and estimate a two-step difference GMM model for 173 European NUTS 2 regions between 2008 and 2019. Our results reveal an inverted U-shaped relationship: moderate agglomeration enhances eco-efficiency, whereas excessive concentration reduces it, signalling congestion diseconomies. Peripheral and semi-central regions benefit most, while core regions appear to have surpassed their optimal concentration. Renewable energy and environmental policies further shape these outcomes. Thus, the impact of ICT agglomeration depends critically on regional characteristics, calling for place-based policies that integrate digital development with environmental sustainability.