No 2016/2 Explaining regional economic performance

the role of competitiveness, specialization and capabilities

Abstract

This paper is concerned with the explanation of differences in regional economic performance. The first part of the paper presents an overview of how theoretical and applied work of relevance for the analysis of regional economic performance has evolved to its present stance. This leads to the identification of two central factors for regional economic performance, that is, capability building and specialization. There is ample evidence on the impact of these two factors on economic development at the national level, but lack of relevant data has until recently made it difficult to explore these relationships at the regional level. This paper uses data that has recently become available for European regions to delve further into the relationships between capability building, specialization and economic performance. The analysis shows that regional economic performance and capability building does indeed go hand in hand, while the evidence regarding the impact of specialization is more mixed. Finally, the implications of these findings for regional policy and future research are considered.