The Impact of Regional Absorptive Capacity on Spatial Knowledge Spillovers

We design a conceptual framework for linking two approaches: the literature on absorptive capacity and the literature on spatial knowledge spillovers. Regions produce new knowledge, but only part of it is efficiently adopted in the economy; the share of efficiently adopted technology depends on territorial capital. Our data set is based on a panel of European regions over the period 1999-2005, combining data from EUROSTAT and the European Values Study (EVS); we test the hypothesis that insufficient levels of territorial capital hamper the capability of regions to grasp and fully exploit new knowledge. Results show that a lower regional absorptive capacity increases knowledge spillovers towards surrounding areas, hampering the regions' capability to understand, decode and efficiently exploit new knowledge, both locally produced and originating from outside

Digital transition in a turbulent world: European regional growth opportunities in 17 years' time

Recently, the digital transition has been highlighted as a strategy fostering economic competitiveness. How the advantages from the digital transition will distribute over time and space is still unclear. This paper builds scenarios comparing the effects of a digital transition. Technological assumptions are consistently related to the assumptions on other structural changes. The internal coherence among assumptions is guaranteed by a larger overarching framework based on how the geopolitical context will evolve. A deeper within-EU integration and global cooperation, or a fragmented Europe torn in a world polarized in two blocs, enhance the digital transition and the main structural changes in different ways.Qualitative assumptions, validated through a Delphi analysis, are translated into quantitative ones and included in our MAcroeconometric, Social, Sectoral, Territorial 5 (MASST5) model, a regional macro-econometric forecasting model, through which simulations of GDP growth rates at regional (NUTS2) level are simulated for the period 2021-2038. Results show that if the digital investment plans stimulate growth, they only partially reverse regional growth divergence trends caused by advantages stemming from an integrated market, even if distributed with the aim of closing the digital gap among European countries

After Crisis Scenarios for CEECs: A simulation through the MASST3 model

Over the last few years, the world economy has gone through a severe period of economic downturn, the worst since the end of WWII. Although the crisis has been widely covered on the media, less common knowledge is the fact that the crisis has engendered responses in the economic systems, in the form of structural adjustments. The aim of the present paper is to build after-crisis scenarios in order to raise awareness on the possible ways out of the present economic downturn. The scenarios that will be presented in the paper are "response to the crisis scenarios", in that built on the basis of alternative trends that structural adjustments can follow. In particular, the paper presents a reference scenario, whereby the first structural changes that have been caused by the crisis, as well as the early structural reactions that can be already observed in the data, are modeled. This scenario represents the benchmark against which the two alternative scenarios, based on assuming radically different trends in the evolution of the responses to the crisis, will be compared. In particular, a first scenario is the so called regional cohesion scenario, a scenario of competitiveness obtained thanks to the exploitation of local excellence and untapped local resources. In this scenario, economic resources, in particular innovation-related and FDI-driven, are assumed to be distributed more evenly with respect to the reference scenario, thus shifting towards areas hosting second-rank cities. The second alternative scenario is a social cohesion scenario, built around the idea of limiting social costs of the crisis. In this second alternative scenario, resources are assumed to be distributed differently with respect to both the reference and the regional cohesion scenario, and in particular to be oriented towards less urbanized areas. Both scenarios have positive and shareable reasons to be developed, and have therefore the same legitimization to be supported by policy-makers. In other words, neither is to be considered ex-ante preferable, and both can be justified on the basis of different policy targets. The results of the simulation exercise, obtained by running the macroeconomic regional growth forecasting model MASST3, are rather interesting. Unexpectedly, the regional cohesion scenario achieves both the highest aggregate growth rates, as well as the lowest increase in regional disparities. Contrary to general beliefs, the social cohesion scenario displays less effectiveness in fostering convergence processes. These results may drive future cohesion policies to reinforce local excellence and tap the untapped resources

Firm aggregations and firm performance: Evidence from network contracts

In Europe, the economic contraction starting in 2007–2008 has called for new economic policy tools. This paper analyses one of such policies, i.e. the network contract. Network Contracts are an innovative policy introduced in Italy with Law 9 April 2009, N. 33. This policy fosters the creation of firm aggregations with an ad hoc contract, without resorting on mergers. Network contracts are meant to increase economic efficiency for all firms involved in the contract. The paper employs a unique data base with panel data on companies’ balance sheets for the period 2007–2012 along with data on the characteristics of their network contract. The effect of signing a network contract on the economic performance of the single firms and their aggregations is econometrically analyzed. Empirical results suggest in particular that (i.) firms signing a network contract tend to outperform firms that do not, and (ii.) network contracts whose members agree to commit more effort in the contract tend to outperform network contracts with less formally stated degrees of commitment

Firm cooperation policies: the impact of territorial spillovers

Research on program evaluation, and in particular on firm cooperation policies, has been scant on the impact of space-specific characteristics on program impacts. Few studies have analyzed how spatial features, that are sticky (immobile over time) and non-mobile (immobile over space), may affect the intensity of a program’s effect on the targeted economic outcome. This paper uses a regional program (ERGON1) aimed at fostering the creation of Network Contracts to shed light on the contribution of spatial features to policy effectiveness. Network Contracts have been introduced in Italy with Law 9 April 2009, N. 33 to stimulate the formation of firm aggregations and to increase economic efficiency for network members. Empirical results, using Propensity Score Matching Estimates, suggest a positive and causative relation between membership in a Network Contract and firm productivity. Furthermore, evidence suggests that matching for urban characteristics significantly improves matching quality. Evidence is thus provided on the relevance of spatial features in shaping the returns to policies, thereby suggesting that ignoring such features may provide a biased picture of the true effect of a program

Smart cities and the urban digital divide

The debate on urban smartness as an instrument for managing more efficient cities has been revolving around the notion that Smart Cities might be causing an increase in inequalities. This effect would be caused by the role played in smart urban transformations by Multi-National Corporations, which would be influencing local policymakers’ agendas. In this work we empirically verify whether smart urban characteristics are associated with an increase in urban inequalities along the digital divide dimension among urban dwellers. To this aim, we exploit a large database of 181 European cities, with data on smart urban characteristics, along with measures of the digital divide obtained with the use of survey data carried out at the European Union level. Results show a negative causal relation between the level of urban smartness and the digital divide within-EU cities. Our findings are robust to a number of robustness checks

Territorial scenarios in Europe: growth and disparities beyond the economic crisis

Up to the start of the present economic crisis (2008), Europe was characterized by a clear trend of convergence in the GDP level of European countries, which was able to counterbalance the opposite trend in intra-national disparities that took place in many countries – namely those with a more recent accession to the Union. The economic downturn of the last years, however, has brought this process of convergence to a halt, mainly as a consequence of the tight austerity policies imposed to many southern European countries. This evidence, recognized by the European Union in the last Cohesion Report (“the crisis has reversed the process of convergence of regional GDP per head and unemployment within the EU”) brought to the fore the relevance of macroeconomic policies in regional development. Therefore in this paper, with the help of a newly built macroeconomic and regional forecasting model (MASST), the future of regional convergence / divergence in the EU is explored through four scenarios: a baseline one, recognizing the clear break of the crisis and three exploratory scenarios, depicting in a consistent way three different “territorial” strategies: supporting large metropolises vs. cities of second and third rank, vs. peripheral and lagging regions. Interestingly enough, the “cities” scenario proves to be at the same time the most cohesive and the most expansionary, shedding some doubts on the traditional equity/efficiency trade-off through an intermediate strategy based on the exploitation of a diffused territorial capital. Overall, diverging regional processes are forecasted from now to 2030.Bis zum Beginn der gegenwärtigen Wirtschaftskrise (2008) zeichnete sich Europa durch eine deutliche Tendenz zur Annäherung im BIP-Niveau der europäischen Länder aus. Dadurch konnte die gegenläufige Entwicklung intranationaler Missverhältnisse ausgeglichen werden, die in vielen Ländern stattfand - vor allem jenen, die erst vor kurzem in die Union aufgenommen worden waren. Der wirtschaftliche Abschwung der zurückliegenden Jahre hat diesem Konvergenzprozess jedoch Einhalt geboten, hauptsächlich infolge der strengen Sparpolitik, die vielen südeuropäischen Ländern auferlegt wurde. Diese Tatsache wurde auch im aktuellen Kohäsionsbericht der Europäischen Union anerkannt ("Die Wirtschaftskrise kehrte den langjährigen Trend der Annäherung von BIP und Arbeitslosenquote innerhalb der EU um") und unterstreicht die Bedeutung einer makroökonomischen Politik für die regionale Entwicklung. In diesem Papier wird - mithilfe eines neu aufgestellten makroökonomischen Modells der Regionalentwicklung - die Zukunft der regionalen Konvergenz/Divergenz in der EU anhand von vier Szenarien erforscht. Ein Basisszenario würdigt die Krise als sauberen Schnitt; drei untersuchende Szenarien stellen drei verschiedene "territoriale" Strategien auf einheitliche Weise dar: Unterstützung großer Metropolen versus zweit- und drittrangiger Städte versus Rand- bzw. rückständiger Regionen. Interessanterweise zeigt sich das "Städte"-Szenario als das geschlossenste und gleichzeitig das expansionistischste, was - unter Berücksichtigung einer Übergangsstrategie, die auf der Ausnutzung eines diffusen territorialen Kapitals basiert - Zweifel am traditionellen Kompromiss zwischen Gerechtigkeit und Effizienz aufkommen lässt. Insgesamt werden Prognosen für unterschiedliche regionale Prozesse von jetzt bis 2030 erstellt

Equilibrium vs. optimal city size: evidence from Italian cities

In this paper, the stylised assumption that one single 'optimal' city size exists for all cities - achieved when marginal location costs equal marginal location benefits - is abandoned, as well as the opposite view that each city operates on its own cost and production curves, defining a specific optimal size. Instead, this work maintains the comparability among cities and demonstrates that urban specificities in functions performed, quality of life, industrial diversity and social conflicts shift up and down the benefits and costs linked to pure physical size, leading to different 'equilibrium' sizes for cities. A model of equilibrium urban size is set up, and empirically estimated on a sample of 103 Italian cities with data at NUTS3 level. Empirical results verify the empirical model on the analysed sample; results hold both with standard OLS estimates as well as with the use of instrumental variables in order to correct for the possible endogeneity of some of the variables in the model. Differences between predicted and real city size are interpreted with good or bad governance, thereby suggesting future strategies for more efficient urban planning

Better together: Untapped potentials in Central Europe

Borders prevent the optimal exploitation of socio-economic and environmental resources. A relevant obstacle due to missed integration is associated with legal and administrative barriers, which cause the emergence of untapped potentials. This paper exploits the case study of the Interreg Central Europe programme. Removing borders among countries in the area enhances scale economies due to a large market for inputs and goods, both within regions and across Central European area regions. This paper identifies untapped potentials by looking at the missed regional GDP growth due to the inefficient exploitation of regional growth assets. Results hint at a complex and heterogeneous spatial distribution of untapped potentials, involving several growth factors