14 Dec Economic Growth in European Union NUTS-3 Regions
This paper analyzes the growth pathways
of 1,321 regions in the European Union from 2003 to 2017.
The aim is to inform integrated territorial investments and
other economic development initiatives in lagging regions.
Using the definition of lagging regions from the European
Commission’s Catching Up Initiative, more than two-thirds of
the European Union member states have lagging regions when
defined at the Nomenclature of Territorial Units for
Statistics-3 scale. These small lagging regions are often
hidden within larger and more prosperous regions. The paper
considers the roles of industrial structure, innovation, and
inward foreign direct investment as growth-enhancing
factors. The findings indicate that the growth dynamics in
low-income regions are different from those in regions in
other income groups: there is no overall pattern in the
contribution of industry to growth but there is a strong
association between foreign direct investment and growth.
Among low-growth lagging regions — the 171 small regions in
the European Union with gross domestic product per capita
less than 90 percent of the European Union average, and
stagnant or negative growth performance — growth is
correlated with construction and innovation. There are also
differences in the growth pathways of rural and non-rural
regions: growth is associated with moving away from
agriculture in rural regions, and it is associated with
construction and innovation in non-rural regions. The
results imply that a finer geographic scale can be important
in policy making and programming of Cohesion Policy Funds,
to cater to different needs and opportunities at the scale
of Nomenclature of Territorial Units for Statistics-3 regions.