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Main Determinants of Regional Economic Resilience

Client

European Commission

Year

2019


What was the impact of the great recession on EU regions? In collaboration with Prognos Consultant Neysan Khabirpour from the EU-Office in Brussels, a recent European Commission Working Paper analyses the determinants of regional economic growth and resilience across European Union regions after the economic crisis of 2008. The results indicate that determinants differ across regions.

As the 2008 economic and financial crisis revealed, some European regions were better equipped than others to deal with the crisis. This study investigated the reasons why some regions were more resilient than others. Do regions vary in their ability to recover and what internal and external factors are associated with the capacity to cope with economic adversity?

Study design

In order to answer these questions, a conditional growth model has been estimated, whereby the economic growth across EU regions depends on a set of initial factors, like human capital and investments, as well as proximity to other regions. The study also employed a subset of components of the Regional Competitiveness Index (2010) to explain growth differentials across EU regions. The EU regions were grouped into two groups, according to their level of economic development: a north-west core of relatively high-income regions, and a south-east periphery of lower-income regions. Then it has been tested whether this set of explanatory variables has a similar impact on the economic growth of the two groups of regions.

Results of the study

Both groups of regions experience economic convergence, recent determinants of growth, as well as spillover effects, differ across the two. In the core regime better institutions, higher shares of investment and an economy specialising in higher-value-added sectors significantly spur domestic growth, with investment also inducing positive spillover effects to neighbouring regions. In the peripheral regime, low shares of lower-secondary educational attainment and high shares of tertiary educational attainment have a significant positive effect on domestic growth, with higher shares of tertiary educations attainment also inducing positive spillover effects. Technological readiness is also identified as an important factor in the peripheral regime creating positive spillover effects.

This is a critical time for the future of EU Cohesion Policy with the regulations for the post-2020 regional policy period currently under discussion. Several findings in this study are particularly relevant to this debate and should be factored into the ongoing discussions.

To the study (PDF, EU-Commission Website): THE GREAT RECESSION: main determinants of regional economic resilience in the EU

More information from the EU-Commission

Author: Neysan Khabirpour

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