This paper examines the impact of knowledge endowments on the economic growth of European regions by considering the channels through which (labour productivity or employment) they increase income levels (GDP per capita). We consider a wide array of knowledge base indicators for explaining the growth performance of 150 developed NUTS2 regions over 1995-2002. Their effect is estimated by controlling for the occurrence of catching-up (or convergence), the regional structural features and the presence of spatial correlation. The results show that GDP per capita growth is positively affected by both the R&D intensity and the share of adults with tertiary education. However, while R&D is particularly effective in explaining the growth of labour productivity, the occupation ratio is significantly influenced by educational attainments. The policy message arising from these findings seems quite straightforward for the regions experiencing a virtuous pattern of economic growth, based on both productivity and employment increases. Instead, for the those characterised by a trade-off between the latter variables the policy approach appears to be more problematic. We show that such a trade-off is particularly evident for the developed regions of Southern European countries.