Structural determinants of regional competitiveness: experience of EU regions

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Structural determinants of regional competitiveness: experience of EU regions

Journal Title: Регіональна Економіка - Year 2018, Vol 87, Issue 1

Abstract

The paper investigates the EU regional policy and assesses the structural factors of the regions’ competitiveness according to the territorial division of NUTS2. The regional disparities in the EU-28 remain to be particularly significant, as many countries (mainly the new members) have lower level of economic development and less advanced infrastructure. Despite the strong efforts to improve the EU’s regional policy, the economic inequalities of the regions remain to be high. The purpose of the study is to analyze and compare the impact of the structure of employment on the competitiveness of the EU regions, taking into account the differences in economic development. A regional space-based development policy, aimed at convergence and economic growth support of structurally weak regions, is analyzed in the paper. The directions of the EU “smart specialization” strategy focused on stimulation of local business initiatives and technological improvement of the region’s base are determined. The main variable of our interest is the Regional Competitiveness Index, which consists of the basic sub-index and the measures of efficiency and innovation. We analyzed ten the most and the least competitive regions of the EU in 2016. In the least developed regions we observed that the absence of companies - technological leaders results in the outflow of skilled labor and the employment is concentrated in low value-added industries, causing a “regional depression trap”. The empirical analysis of the determinants of regional competitiveness was performed with a panel regression for the data of 276 EU regions (NUTS2), divided into 2 subgroups according to the stages of development based on the methodology of Eurostat Statistical Atlas. The first subgroup included stages of development 1-2 (107 regions) and the second – stages of development 3-5 (169 regions). The Regional Competitiveness Index was used as dependent variable, while explanatory variables were the income of private households, the share of employment in industry and in nonfinancial sector. The employment structure reflects shares of low and high value added sectors. The results indicate that increased employment in sectors with low added value negatively affects regional competitiveness. Relatively low employment rates in the EU industrial sector point out that big companies tend to move their production to regions with lower costs of labor and other inputs, often as a consequence of fragmentation of production and extended participation in global value chains. A technology transfer to weaker EU regions improves their employment rates, enhances overall economic efficiency and competitiveness, but keeps the regions exposed to the phenomenon known as “regional depression trap.” The paper identifies the policy recommendations that may contribute to increase of the regional competitiveness. In particular, the support of high value added sectors with high-wage employment provides stimuli for dynamic growth, and, taking into account the current trends of production automatization and the spread of international fragmentation of production stages, may provide sustainable development of the regions.

Authors and Affiliations

Nataliya I. Cherkas

Keywords

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EP ID EP546676
DOI -
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