Transcript Politecnico-WP1-Halle

GRINCOH. Growth – Innovation – Competitiveness:
Fostering Cohesion in Central and Eastern Europe
Seventh Framework Programme
Halle 22-23 November 2012
Work package 1.
Success factors of regional growth in Eastern countries:
a diachronic perspective.
Roberta Capello and Giovanni Perucca
Politecnico di Milano
Aim of the paper
•
After the fall of the Iron Curtain in 1989 Eastern countries began a process of
deep political and economic change.
•
Economic development has been promoted by a set of different success
factors.
•
These factors vary across regions and time periods.
•
Our aim is to interpret the growth dynamics of Eastern regions in the last 20
years, pointing out the role of structural elements and different industrial
strategies.
Summary of the presentation
1. Literature review;
2. definition of three distinct periods and analysis of the corresponding growth
patterns;
3. description of success factors of regional growth in the three periods;
4. description of industrial competitive strategies linked to regional growth
patterns;
5. an interpretative analysis of regional growth.
Literature review
Many works addressed the issue concerning development startegies in EU12
countries. Restricting our attention to the regional economics literature we
identify two categories of studies.
A first block on contribution focused on regional convergence and on its effect on
regional inequalities ( Artelaris et al., 2010; Monastiriotis, 2011; Camagni and
Cappellin, 1985).
A second group of works is devoted to the determinants of economic growth in
Eastern regions. In brief, these contributions can be classified into three
categories:
- those referring to the years subsequent to the fall of the Iron Curtain (Gorzelak,
1998; Resmini, 2003);
- those focused on the years following the accession to the EU (Gorzelak and Goh,
2012);
- country-studies aimed at pointing out peculiarities of the regions within a particular
nation (Traistaru et al., 2002; Gorzelak et al., 2001)
Literature review
Our work places itself in the second group. However, it differs from previous
literature in three main aspects:
1. it covers the evolution of Eastern economies from the end of the socialist era to
the post-accession period;
2. the analysis of the relationship between economic growth and territorial assets
is widened to a broad set of potential success factors. The latter are identified
based on the findings of the literature on endogenous growth;
3. beyond the analysis of success factors, it explores the role of industrial
strategies in reshaping Eastern economies.
Summary of the presentation
1. Literature review;
2. the three distinct periods and analysis of the corresponding growth patterns;
3. description of success factors of regional growth in the three periods;
4. description of industrial competitive strategies linked to regional growth
patterns;
5. an interpretative analysis of regional growth.
The three institutional periods
The
fall of
the
Berlin
Wall
1989
CY and
MT apply
to
become
members
of the EU
1990
1991
RO and BG
join the EU.
BG, CY, CZ, EE, HU, LV,
LT, MT, PL, Romania, SK
and SL start the process
of membership
negotiation with the EU
Czechoslovaki
a split into CZ
and SK
1992
The
Maastric
ht Treaty
is signed
1993
1994
CY, CZ, EE, LV,
LT, HU, MT,
PL, SL and SK
join the EU
1995
1996
HU and PL (1994),
BG, EE, LV, LT, RO
and SK (1995), CZ
and SL (1996) apply
to become members
of the EU
1997
1998
1999
2000
2001
2002
The Nice Treaty
prepares
European
institutions for
the forthcoming
enlargement
First period: pre-accession
2003
2004
2005
SL adopt the
euro as the
national
currency
2006
2007
The ECB claims
that long-term
interest rates
have been driven
too low in some
financial markets
and banks could
have loosened
credit standards.
Sencond period:
first EU
enlargement
SK adopt
the euro
as the
national
currency
2008
2009
CY and MT
adopt the
euro as the
national
currency
Lehman
Brothers files
for
bankruptcy
Third period:
second EU
enlargement
and economic
crisis
Growth patterns in the three periods
In order to highlight the variety of growth patterns followed by Eastern regions, we
adopted the classification proposed by Camagni (1991). It combines together relative
employment growth (REG) and relative productivity growth (RPG) of regions:
Relative productivity growth
where r stands for the region, while the
reference area is EU27. Initial and final
periods are marked respectively with 0
and 1. N and P represent employment
and productivity.
The GNP growth rate of the regions lying
on the 45° negative sloped line is equal
to the EU27 average. Besides, we are able
to identify six different patterns of
growth.
Relative employment growth
Growth patterns in the three periods
Relative productivity growth
II – Effective
reorganization
I – Virtuous
cycle
III – Uneffective
regorganization
Relative employment growth
IV –
Economic
crisis
VI – Sheltered
development
V–
Conservatism
Growth patterns in NMS
Apart from Baltic regions and HU, all Eastern countries follow a similar
dynamic path from the effective reorganization quadrant to the virtuos cycle.
Growth patterns in NMS
The same path is observed for BG and RO, but not for MT and CY.
Regional growth patterns
• Despite a strong country-effect, regions follow a variety of trajectories.
• Compared to EU27, we observe a slowdown of regional growth in the last period.
• Does regional heterogeneity differ compared with Western Europe?
Employment growth rate: deviation from the country mean in the three periods.
1995-2004
2004-2007
2007-2009
Productivity growth rate: deviation from the country mean in the three periods.
1995-2004
2004-2007
2007-2009
Summary of the presentation
1. Literature review;
2. the three distinct periods and analysis of the corresponding growth patterns;
3. description of success factors of regional growth in the three periods;
4. description of industrial competitive strategies linked to regional growth
patterns;
5. an interpretative analysis of regional growth.
Endogenous assets and growth patterns
Which factors are associated to each growth pattern in the different periods?
A first group of elements are suggested by the previous literature on this issue:
• the relative location with respect to EU15 (Resmini, 2002),
• FDI flows (Traistaru et al., 2002),
• the role of agglomeration economies and capital cities (Kallioras and Petrakos,
2010; Gorzelak, 2001),
• the stage of development at the beginning of the period (Gorzelak, 1998).
In addition, we include two groups of factors:
 territorial capital assets (such as public capital, social capital, human capital)
 sectoral specialization indicators.
Endogenous assets and growth patterns in the first period (95-04)
• Regions specialized in
• The findings of the
literature are confirmed.
non-advanced
manufacturing
RPG
• Capital cities and
bordering regions ,
(specialized in market
services and attracting
high volumes of FDI)
REG
• The virtuous cycle is
associated to the regions
close to the western
borders, those hosting a
capital city and those
specialized in market
services such as financial
intermediation and
tourism.
• High levels of social
capital are associated to the
II quadrant.
Endogenous assets and growth patterns in the second period (04-07)
• Rural areas specialized in
agriculture and marked by
low levels of human capital
RPG
• Poor social capital
areas
Capital cities and large
urban centers characterized
by:
• transport accessibility,
• high levels of human
capital;
• high levels of social
capital;
• a specialization in market
services
REG
• Despite the confirmed
importance of some
elements (capital cities,
specialization in market
services) the factors
associated to the different
patterns change.
• Human and social capital
are associated to the
virtuous cycle.
• Rural areas fail to shift
from the II quadrant to the
virtuous cycle.
Endogenous assets and growth patterns in the third period (07-09)
• Regions specialized in
manufacturing, especially
textiles and machineries
RPG
• Regions specialized in
public functions
• R&D is now associated to
the virtuous cycle.
Capital cities and large
urban areas characterized
by:
• transport accessibility;
• high levels of social
capital;
• high per capita GDP;
• high per capita
expenditure in R&D;
• a specialization in market
services
• Regions in the ineffective
reorganization quadrant in
2004-2007 fall in the crisis
one.
REG
• Manufacturing areas with
low levels of social capital
• Dense areas specialized
in commerce
• Rural areas
specialized in
agriculture
• Regions in the effective
reorganization quadrant in
2004-2007 fall in the
conservative one.
Summary of the presentation
1. Literature review;
2. the three distinct periods and analysis of the corresponding growth patterns;
3. description of success factors of regional growth in the three periods;
4. description of industrial strategies linked to regional growth patterns;
5. an interpretative analysis of regional growth.
Industrial strategies and regional growth patterns
• The previous section pointed out the strong association between growth
patterns and sectoral specialization.
• What is the connection between industrial strategies and patterns of growth?
We identify four potential strategies, taking as reference the status quo at the
initial period:
I – increasing productivity in the same sectors of specialization;
II – strategy of employment protection in the same sector of specialization;
III – conversion to higher phases process in different sectors of specialization;
IV – sectoral convertion at the expensens of VA functions for employment
protection.
Industrial strategies and regional growth patterns
Sectoral change
(LI higher than the EU12
average)
Sectoral stability
(LI lower than the EU12
average)
Functional upgrade
Functional stability
(FC higher than the EU12
average)
(FC lower than the EU12
average)
Strategy III – Intersectoral upgrading:
conversion to higher
phases process in
different sectors of
specialization
Strategy IV – Intersectoral change: sectoral
convertion at the
expensens of VA functions
for employment
protection
Strategy I – Functional
upgrading: increasing
productivity in the same
sectors of specialization
Strategy II – Relative
presevation: strategy of
employment protection in
the same sector of
specialization
Industrial strategies and regional growth patterns
How can we empirically identify these strategies?
The four strategies involve two dimensions:
 the sectoral organization of activities;
 the functional change within each sectoral value chain.
We want to investigate competitive strategies occurred in the first
institutional period (1995-2004).
Following Affuso et al. (2011) the sectoral change can be captured by the
Lawrence Index:
The functional change is measure as the change of the ratio between
professionals and manual workers employed in a region:
Industrial strategies and regional growth patterns
• Professional upgrading is
strongly associated to the
virtuous cycle.
• Between strategy I and III,
the sectoral change is linked
to higher productivity growth
rates.
• The simultaneous change in
sectoral organization and
functional upgrading applies
in particular to the market
service sector.
• A change in both sectors is
associated with the fourth
strategy; these regions are still
in the reorganization pattern
between 2004 and 2007.
Industrial strategies and regional growth patterns
What kind of region is associated to each strategy?
Functional upgrade
(FC higher than the
EU12 average)
Functional stability
(FC lower than the EU12
average)
Sectoral change
(LI higher than the EU12
average)
Capital city regions
Low per capita GDP
regions (rural areas)
Sectoral stability
(LI lower than the EU12
average)
High per capita GDP
regions (second order
cities)
Industrial strategies and regional growth patterns
What are the effects of different industrial strategies?
Functional upgrade
(FC higher than the
EU12 average)
Functional stability
(FC lower than the EU12
average)
Sectoral change
(LI higher than the EU12
average)
• Increase in productivity (0409).
• Increase in the ratio
between professionals and
manual workers (2007)
• Development of a
concentrated manufacturing
sector.
• Decrease in the ratio
between professionals and
manual workers (2007)
Sectoral stability
(LI lower than the EU12
average)
• Low GDP growth rates (0409), even if these regions
mantain a higher per capita
GDP level.
• Increase in the ratio
between professionals and
manual workers (2007)
• Development of a
differantiated manufacturing
sector
Summary of the presentation
1. Literature review;
2. the three distinct periods and analysis of the corresponding growth patterns;
3. description of success factors of regional growth in the three periods;
4. description of industrial strategies linked to regional growth patterns;
5. an interpretative analysis of regional growth.
An interpretative analysis of regional growth
• The previous parts linked economic growth in EU12 countries to a variety of
factors and territorial assets. These elements are not stable across time periods.
• The results of the previous sections are tested in a regional growth model.
• The aim of this section is to assess the role of the success factors mentioned
above on the economic performance of Eastern regions in the three institutional
periods.
• By pooling our data employed in the ANOVA we obtain a short panel (three
periods). The dependent variable is represented by the average yearly GDP
growth rate for each NUTS2 region.
Endogenous assets and growth patterns
Full sample
Period 1:
1995-2004
Period 2:
2004-2007
Period 3:
2007-2009
VARIABLES
Per capita GDP
-6.741**
28.760***
-8.750**
-3.679**
Capital city
0.035**
0.004*
0.075***
-0.040*
Bordering regions (West EU)
0.003
0.008
-0.028*
0.036**
FDI
-0.005
-0.068
0.031***
-0.010***
Population in the LUZ
0.013
-0.035**
-0.003**
0.079**
Transport accessibility
0.001
0.010
0.020
-0.002
Social capital
-0.029
-0.062
-0.093
0.187**
0.034**
0.183***
0.012*
0.001**
Patents
0.050
0.385
-0.057
0.192**
Informal knowledge
0.011
-0.365**
0.158***
Strategy I (Functional
uprgrading)
Strategy III (Inter-sectoral
upgrading)
Strategy IV (Inter-sectoral
change)
Period 1
-0.007
0.000
-0.001
-0.018
-0.005
-0.002
-0.040
0.024*
-0.005
-0.004
0.010**
0.000
0.059**
-0.018
0.052***
0.122***
Period 2
0.132***
0.139***
0.120***
0.193***
Country dummies
Constant
Yes
0.066*
Yes
0.030
Yes
0.088***
Yes
-0.022***
Observations
Adjusted R-squared
153
0.698
153
0.706
153
0.785
153
0.732
High education
Conclusions
Some of the results achieved by the previous literature on the first period, such as
the role of capital cities, are confirmed.
Nevertheless, there is an emergence of second ranks cities in the development of
regions.
Succes factors in Eastern regions are not stable across different time periods.
In the second and third periods the importance of endogenous factors such as
social capital and capabilities increases.
The opposite holds for exogenous factors, as the FDI.
The process of convergence within EU12 regions occurs only in the second period.
The inter-secoral change strategy is effective in a period of generalized economic
growth. In the crisis period inter-sectoral upgrading generates the highest payoff.
References
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