Do institutions matter for regional development?

This paper discusses whether institutions matter for regional development and how to integrate them in regional development strategies. It finds that while institutions are crucial for economic development, generating an institution-based regional development strategy is likely to be undermined by the lack of definition of what are adequate, solid, and efficient institutions. Problems related to the measurement of institutions, to their space and time variability, to the difficulties in establishing the right mix of formal and informal institutions, and to the endogeneity between institutions and economic development make one-size-fits-all approaches to operationalizing institutions difficult. Development strategies specifically tailored to the conditions of different regional institutional environments across regions may yield greater returns.

Infrastructure endowment and investment as determinants of regional growth in the European Union

This paper analyses the role of infrastructure endowment and investment in the genesis of regional growth in the European Union. It assesses the economic effects of the existence and improvement of transport networks in light of their interactions with innovation and local socio-economic conditions. The analysis accounts for spatial interactions between different regions in the form of spillovers and network externalities. The regression results highlight the impact of infrastructural endowment on regional economic performance, but also the weak contribution of additional investment. Regions having good transport infrastructure endowment and being well connected to regions with similar good endowments tend to grow faster. However, investment in infrastructure within a region or in neighbouring regions seems to leave especially peripheral regions more vulnerable to competition. Furthermore, the positive impact of infrastructure endowment on growth tends to wane quickly and is weaker than that of, for example, the level of human capital

Learning processes and economic returns in European Cohesion policy

This paper evaluates whether the learning mechanisms of the European Cohesion policy have contributed to improve the economic impact of Structural Fund expenditure over time. It intends to show whether the evolution of the policy in response to greater internal monitoring and consultation and external scrutiny and criticism has resulted in a more efficient and better targeted Cohesion policy. This is tested using an econometric model which evaluates the effect of Structural Fund expenditure on the growth of regional GDP per capita – conditional on factor endowments, institutional quality and initial conditions – during the last programming periods for which full sets of data are available (1994-1999 and 2000-2006). The results of the analysis unveil an increase in the effectiveness of the policy in successive periods. This positive association is robust to controlling for the level of development of the country and the relative economic position of a region within a country. The results also show that, when structural factors are taken into consideration, Structural Fund investment tends to yield higher returns in better-off countries and wealthier regions within countries.Cohesion; regional development; economic growth, GDP per capita; regions; European Union

Can policy make us happier? Individual characteristics, socioeconomic factors, and life satisfaction in Central and Eastern Europe

In the last decade, Central and Eastern European (CEE) countries have witnessed a rapid economic convergence vis-à-vis Western Europe. However, this rapid growth has not been matched by a similarly rapid increase in life satisfaction, which has remained low in the European context. This paper sets out to address this conundrum, by looking at the individual and macro-level determinants of individual life satisfaction in ten CEE countries. The results highlight that while Central and Eastern Europeans share the same individual determinants of happiness as people in the West (despite some significant cross-country variation), macroeconomic and institutional differences are the key factors behind the lack of convergence in life satisfaction. On the macroeconomic side, GDP growth is still a source of increasing well-being, but the happiness bonus associated with it is becoming smaller. The different levels of individual happiness in CEE are therefore mostly determined by institutional factors such as corruption, government spending and decentralisation, making policies aimed at enhancing institutional quality capable of bringing about substantial improvements in the overall life satisfaction of the people in the region.Happiness; Convergence; Easterlin paradox; Institutions; Corruption; Decentralisation; Central and Eastern Europe

Reconciling top-down and bottom-up development policies

Top-down and bottom up development policies have been generally sold as two irreconcilable ends of the development intervention spectrum. Top-down policies, solidly based in micro- and macroeconomic theories, but lacking the adequate flexibility and ‘place-awareness’ to respond to local complexity; bottom-up approaches much more responsive to diverse territorial needs, but devoid of a clear conceptual framework. In this paper we aim to show that this division need not remain still and that the foundations of top-down and bottom-up development policies can be reconciled in a joint 'meso-level' conceptual framework which can serve simultaneously as a deductive justification for bottom-up local and regional development policies and as a coordination device between different policies.development policies; top-down; bottom-up; integrated framework

Returns to Migration, Education, and Externalities in the European Union

Relatively little attention has been paid to the role that externalities play in determining the pecuniary returns to migration. This paper addresses this gap, using microeconomic data for more than 100,000 individuals living in the European Union (EU) for the period 1994-2001 in order to analyse whether the individual economic returns to education vary between migrants and nonmigrants and whether any observed differences in earnings between migrants and locals are affected by household and/or geographical (regional and interregional) externalities. The results point out that while education is a fundamental determinant of earnings., European labour markets – contrary to expectations – do not discriminate in the returns to education between migrants and non-migrants. The paper also finds that household, regional, and interregional externalities influence the economic returns to education, but that they do so in a similar way for local, intranational, and supra-national migrants. The results are robust to the introduction of a large number of individual, household, and regional controls.Individual Earnings, Migration, Educational Attainment, Externalities, Household, Regions, Europe

Regional economic cycles and the emergence of sheltered economies in the periphery of the EU

It has been claimed that in recent years the evolution of regional disparities within European nations has become pro-cyclical, that is, disparities tend to increase in times of economic boom and to decrease during recessions. This represents a change with respect to the traditional patterns in the 1960s and 1970s, when growth in European lagging regions was higher than in the core during periods of economic growth, but lagging regions were more affected by economic crises. In this paper we first assess where and when this change has happened and then analyse what are the factors behind the change in the evolution of disparities. We use a 20-year long database, comprising NUTS II regions in five European countries (France, Greece, Italy, Portugal and Spain) which include the great majority of European lagging regions. The evidence supports the shift to pro-cyclical patterns in the evolution of regional disparities, especially in those countries with a large number of Objective 1 regions (Spain, Italy and, less clearly, in Greece) whereas in France such a change has not yet occurred. Looking for the determinants of regional economic cycles, we conduct regression analyses finding that the shift in growth patterns is related to the emergence of what is known as sheltered economies, i.e. economies that are increasingly detached from the market, and thus increasingly impervious to economic cycles. Lagging European regions have become over the period of analysis increasingly dependant on factors such as transfers, public investment, and public employment and therefore less exposed to changes in market conditions.

Education and income inequality in the regions of the European Union

This paper provides an empirical study of the determinants of income inequality across regions of the EU. Using the European Community Household Panel data-set for 102 regions over the period 1995-2000, it analyses how micro-economic changes in human capital distribution affect income inequality for the population as a whole and for normally working people. The different static and dynamic panel data analyses conducted reveal that, while the relationship between income inequality and income per capita is positive, the relationship between income inequality and educational attainment is not clear. Across European regions high levels of inequality in educational attainment are associated with higher income inequality. This may be interpreted as the responsiveness of the EU labour market to differences in qualifications and skills. The above results are robust to changes in the definition of income distribution. Other results indicate that population ageing and inactivity are sensitive to the specification model, while work access and latitude are negatively associated to income inequality. Urbanisation has a negative impact on inequality, but for the population as a whole only, and the relationship between unemployment and income inequality is positive. Female participation in the labour force is negatively associated with inequality and explains a major part of the variation in inequality. Finally, income inequality is lower in social-democratic welfare states, in Protestant areas, and in regions with Nordic family structures.Income inequality; educational attainment; educational inequality; regions; Europe

Inequalities in Income and Education and Regional Economic Growth in Western Europe

Does inequality matter for regional growth? This paper addresses this question by using microeconomic data for more than 100,000 individuals over a period of 5 years from the European Community Household Panel (ECHP) dataset, complemented with Eurostat's Regio data, in order to examine the impact of income and educational distribution on regional economic growth. Educational distribution is measured in terms of educational achievement as well as educational inequality, and income distribution in terms of income per capita and income inequality, not only for the whole of the population, but also for normally working people. Our results indicate that, given existing levels of inequality, an increase in a region's income and educational inequality has a significant positive relationship with subsequent economic growth. Nevertheless, the reverse does not seem to be the case, as we do not find a causal link between growth and changes in inequality levels. Despite the fact that educational achievement is positively correlated with economic growth, the results also suggest that inequalities in income and educational attainment levels matter more for economic performance than average income and educational attainment, respectively. Initial income levels, in contrast, are irrelevant for regional economic growth as they are very sensitive to the inclusion of control variables.Income inequality, educational attainment, educational inequality, economic growth, regions, Europe/growth