Regional development traps in Europe

Andres Diemer, Simona Immerino, Andres Rodríguez-Poz, Michael Storper 19 July 2022

Long-term regional economic stagnation at different levels of development is becoming the norm in many parts of Europe (European Commission 2017, 2022). Subpar economic performance, lack of employment opportunities and loss of competitiveness that are increasingly perceived – justly or unjustly – are creating social and political dissatisfaction with a system that does not benefit lagging regions (Dijkstra et al. 2020). Regional stagnation is also fueling the idea that there is a two-tiered Europe, divided into a small number of dynamic and competitive super-regions, where economic and political power converges and increasingly left-back spaces are increasingly felt. As they are less important or less important than before (McCann 2020, McCann and Ortega-Argilés 2021, Rodríguez-Pose 2018).

Stagnation has received some attention at the international level under the guise of the ‘middle income trap’. But stagnant regions have not yet received consistent policy scrutiny, partly because the problem of stagnation has not been precisely defined and analyzed at the subnational scale, and because some stagnant regions do so at relatively high-income levels. As a result, in Europe, the plight of such regions has fallen between the cracks of a European policy that is mostly directed towards less developed regions and national policies that tend to strengthen the winning regions.

Defining and measuring regional development traps in Europe

In a recent article (Diemer et al. 2022), we address these gaps in existing knowledge by introducing and operationalizing the concept of regional development traps in Europe. This concept is borrowed from the theory of middle-income-trapped countries (Eichengreen et al. 2012, Kharas and Kohli 2011) but revised to reflect the characteristics of regional development trajectories in economies with a long tradition of industrialization.

We define a regional development trap as a state in a region that cannot sustain its economic dynamism in terms of income, productivity and employment, underperforming its national and European peers to the same degree. Stated differently, a region falls into a development trap if the prosperity of its inhabitants does not improve compared to its past performance and economic conditions prevailing in national and European markets. We apply this concept to regions that fall into this state from different initial levels of economic development relative to the European distribution, distinguishing between regional development traps of high, middle and low levels of income.

We measure development traps along a three-dimensional continuum including GDP per capita, productivity and employment. In line with the literature on growth recessions (Hausmann et al. 2005), the focus is on the growth rate of this variable, comparing the relative performance of a region to three benchmarks: the region itself in its recent past, other regions in their respective field countries, and the rest of Europe. . We then construct a synthetic index of mobility to map regions in Europe that are trapped or at risk of falling into a development trap.

A portrait of Europe’s regional development trap

Figure 1 maps mean scores on the development-trapping measure for 2001–15. Using the distribution of index values ​​between 1990–2015, the regions of the top two quartiles of risk are mapped, along with quartile values ​​of risk level criteria across all possible historical values.

Figure 1 Risk of being trapped by early stages of development (2001-15)

Dark shaded areas are those that, on average, can be caught in a development trap; Those with a lighter shade are at a higher risk of getting trapped. Color coding allows us to distinguish between development traps at high-income levels (in blue), middle-income levels (in yellow) and low-income levels (in red) depending on primary regional GDP per capita. was above the EU average, between 75% and 100% of it, or below 75% of the EU average. This three-pronged categorization apparently highlights a variety of regional traps across Europe: decline, stagnation and persistent backwardness.

The map shows a number of regions considered to be in or near the European core – often those at the heart of so-called ‘blue bananas’ – that are stagnant. The highest levels of trapping are found in France, particularly in the area around Paris and in northern Italy among ‘industrial victims’ (Rosés and Wolf 2018).

Using categories (and a color scheme) consistent with Figure 1, the characteristics of areas in development traps or at risk can be compared to areas that are not. We compare them across a range of characteristics related to economic structure, physical capital and infrastructure, human capital and labor force characteristics, economic geography, and institutional quality. Figure 2 shows mean characteristics by group at level; Figure 3 considers their changes.

Figure 2 Characteristics of trapped areas by income group level

Figure 3 Evolution of catchment areas by income group level

A few features stand out. Regions in development traps, or at risk of being trapped, exhibit lower shares of manufacturing industries and higher shares of non-market services (mainly covering public services in social welfare, health, education and defence), compared to regions trapped at comparable levels of development. Regions in a trap or at risk of falling into a trap also show lower levels of secondary education attainment and higher age dependency ratios among the working-age population. Institutional quality is associated with relatively low development-trap scores in low- and high-income regions.

Industry growth is lowest (or even negative) in regions that are stuck or at risk of being stuck. Furthermore, entrapment is associated with the growth of non-market services. Low-income enclaves also show weaker growth in the share of college-educated residents, even though this group overall expands faster (due to lower levels of starting). Lagging regions consistently exhibit the weakest growth in patents per capita. In poorer regions, dynamic regions have stronger output growth, highlighting the potentially important role played by innovation in achieving regional dynamism.

Congested areas deserve policy attention

Marking the trapped regions shows a Europa with different speeds. Trapping is creating social and political discontent that is increasingly perceived – justly or unjustly – as a system that does not help disadvantaged areas (Dijkstra et al. 2020). This fueled the perception that there is a two-tiered Europe, divided into a relatively small number of dynamic and competitive super-regions divided between economic, political, and social power and prestige, and the ever-increasing space of left-back spaces. Residents feel they are less important (McCann 2020, McCann and Ortega-Argilés 2021, Rodríguez-Pose 2018, Guiso et al. 2018). Development trap analysis makes these spaces visible.

The problems associated with economically stagnant regions have been largely ignored by European and national decision makers, who have historically tended to target the least-developed regions or focused on strengthening the winners in dynamic urban agglomerations. Caught between these two priorities, many stranded regions have struggled to attract interest.

The challenge for policymakers is to add development traps to their portfolio of concerns, given the many and varied conditions these exist in Europe. This issue focuses not only on ex post, when stagnation is stuck, but also looking forward. Identifying development trap regions rings alarm bells on these surprisingly widespread risks in Europe

reference

Diemer, A, S Iammarino, A Rodriguez-Pose and M Storper (2022), “The regional development trap in Europe”, Economic Geography.

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European Commission (2022), Cohesion in Europe towards 2050: Eight reports on economic, social and territorial cohesionL Dijkstra (ed.), European Commission, Directorate General for Regional and Urban Policy.

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McCann, P, and R Ortega-Argilés (2021), “UK ‘geographies of discontent’: narratives, Brexit and intra-regional ‘levelling'”, Cambridge Journal of Regions, Economy and Society 14(3): 545–64.

Rodríguez-Pose, A (2018), “Revenge of places that don’t matter (and what to do about it)”, Cambridge Journal of Regions, Economy and Society 11(1): 189-209.

Rosés, JR, and N Wolf (2018), “The return of regional inequality: Europe from 1900 to today”, VoxEU.org, 14 March.

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