Regional Competitiveness - Startseite · Europe 2020 Regional Index (Athanasoglou & Dijkstra, 2014,2015) Measures regions’ progress in achieving EU 2020 objectives Ecological EU

Intro Literature The NPO Index NPO Drivers Conclusions

Regional CompetitivenessConnecting an old concept with new goals

Karl Aiginger & Matthias Firgo

Austrian Institute of Economic Research (WIFO)

8th Geoffrey J.D. Hewings Regional Economics Workshop

K. Aiginger & M. Firgo Regional Competitiveness 04/09/2015 WIFO 1 / 23


Motivation

Quest for competitiveness top agenda for firms, politicians,media

Discussion constantly reduced to “cost competitiveness”

Main argument for low wages, taxes, social/eco standards

However, bulk of literature emphasizes importance ofproductivity, technology, and local/regional capabilities

Current project contributes to the discussion on how tomeasure competitiveness

We propose a measure that is in line with Beyond GDP Goals

Outcome competitiveness “under new perspectives” (alsosocial inclusion and ecological ambition)



Outline

1 Introduction

2 Relevant Literature

3 New Perspectives Outcomes (NPO) Index

4 New Perspectives Outcomes (NPO) Drivers

5 Conclusions



Competitiveness as an elusive concept I

Term “Competitiveness” originated at the firm level

Narrowest definition as “cost competitiveness”

“Enlightened” version as balance between factor costs andproductivity per unit

Catching-up economies: Often larger cost difference thanproductivity lag compared to highly developed economies;

Some prominent authors (e.g. Porter, 1990) considerproductivity the only meaningful measure of competitiveness



Competitiveness as an elusive concept II

Newer literature incorporates structural change andtechnological competitiveness

Price of production factors changes with rising income

Thus, countries have to climb up the quality ladder to remaincompetitive (Aiginger, 1997,1998)

Ultimate goal often seen to enable high standards of living,thus outcomes key to measure a country’s/region’scompetitive performance

Aiginger, Barenthaler-Sieber, Vogel (ABSV, 2013): Outcomecompetitiveness under new perspectives is “ability to deliverBeyond GDP goals” (WWWforEurope definition)

Three pillars: income, social, ecological goals



Competitiveness as an elusive concept III

Source: ABSV (2013)



National vs. regional competitiveness I

As at the national level lack of clear definition of regionalcompetitiveness

Absolute (dis)advantages more important at the regional level(Camagni, 2002)

At national level high absolute costs relevant to welfare but noobstacles for trade as can be adjusted via exchange rates andfactor prices (Krugman, 1996)At regional level only very limited mechanisms to adjustabsolute cost differences (same applies to nations in monetaryunions)Thus, uncompetitive region can de-facto exit the market forexports and mobile production factors



National vs. regional competitiveness II

Regional level as “meso”-level between firms (micro) andnations (macro) (Cellino & Soci, 2002)

Regional competitiveness neither a spatial disaggregation ofnational competitivenessNor the sum of productivities of individual firmsRather regions are extremely open spaces of flows (Doel &Hubbard, 2002) in attracting/ retaining production factorsThus, regions’ competitiveness crucially depends on ability toprovide external advantages in production (i.e. favorableentrepreneurial, institutional, social, technological framework& infrastructure)

“Territorial capital” (OECD, 2001; Camagni, 2008) &“Capabilities” (ABSV, 2013) all important to maintainlong-run competitive advantages



Recent measures of regional outcome competitiveness

“Foundational competitiveness” (Delgado et al., 2012)Output per potential worker (GDP per working-age individual)Utilization of the labor market potential besides productivityignores several other dimensions on income and social inclusiondoes not distinguish between dirty and clean production

Regional Competitiveness Index (Annoni & Dijsktra, 2013)“The ability to offer an attractive and sustainable environmentfor firms and residents to live and work”Very comprehensive & well elaborated composite indexIncludes institutional quality, health, labor market efficiency,social inclusionIt completely lacks ecological indicators

Europe 2020 Regional Index (Athanasoglou & Dijkstra,2014,2015)

Measures regions’ progress in achieving EU 2020 objectivesEcological EU 2020 goals omitted because a lack of data



New Perspective Outcomes (NPO) Indicators

Shortcut Description of Composite Indicator No. ofindicators

NPO NPO based on INCOME, SOCIAL, ECO 3INCOME NPO - Income pillar 3SOCIAL NPO - Social pillar 6ECO NPO - Eco pillar 3

COST Cost competitiveness 4STRUCTURE Economic structure 6CAPABILITIES Capabilities to provide competitive outcomes 32

CAP EDU INNO Capabil. - Education & innovation 12CAP SOCIAL Capabil. - Social system 5CAP INST Capabil. - Institutions 5CAP INFRASTR Capabil. - (Intangible) infrastr. & amenities 5CAP ECO Capabil. - Ecological 5



NPO scores 2011

dark (light) = good (bad) scores

Top 10StockholmInner LondonUpper BavariaTyrolAberdeen(shire)HamburgSouth TyrolTubingenSwabiaSalzburg



Changes in NPO scores 2005/2011

dark (light) = improvement (decline) in scores



NPO pillar correlations

NPO INCOME SOCIAL ECO

NPO 1.0000INCOME 0.8962* 1.0000SOCIAL 0.8033* 0.6355* 1.0000ECO 0.6683* 0.4249* 0.2550* 1.0000

* significant at 95%



Rank differences to other concepts I

NPO vs. GDP per working-age individual (Delgado et al. 2012)

dark (light) = better (worse) NPO rank



Rank differences to other concepts II

NPO vs. EU Regional Competitiveness Index




Rank differences to other concepts III

NPO vs. EU 2020 Regional Index




Determinants of NPO - Model

Econometric assessment on predictors for changes in NPOscores 2005/11

Cross-sectional growth model

2005 values of explanatory variables to explain changes inNPO scores

Composite variables on costs, economic structures anddifferent dimensions of capabilities

∆NPOi2005/2011=α+ β1NPOi2005

+ β2COSTi2005+ β3STRUCTUREi2005

+ β4CAPABILITIESi2005+ µi2005

.

Also spatial models to account for spatial spillovers

∆NPO2005/2011 = ρW∆NPO2005/2011 + X2005β + WX2005γ + µ2005,

µ2005 = λWµ2005 + ε2005.



Drivers of changes in NPO - OLS

Changes in NPO 2005-2011 (1) (2) (3) (4)NPO 2005 -0.274*** -0.384*** -0.267*** -0.261***

(0.0512) (0.0608) (0.0579) (0.0674)COST 0.0385 -0.107 -0.0626 -0.0599

(0.0733) (0.0683) (0.0803) (0.0865)STRUCTURE 0.0337 0.0115 -0.108* -0.103*

(0.0640) (0.0534) (0.0549) (0.0586)CAPABILITIES 0.138***

(0.0510)CAP EDU INNO 0.224*** 0.167*** 0.169***

(0.0551) (0.0540) (0.0544)CAP SOCIAL 0.0371 0.0654* 0.0659*

(0.0383) (0.0336) (0.0336)CAP ECO 0.0336 0.0678** 0.0679**

(0.0361) (0.0296) (0.0297)CAP INST 0.188*** 0.154*** 0.157***

(0.0294) (0.0305) (0.0343)CAP INFRASTR -0.0632* -0.0158 -0.0145

(0.0327) (0.0288) (0.0285)NAT CAPITAL -0.00476

(0.0157)OBJECTIVE 1 0.00569

(0.0213)East & South Dummies No No Yes YesConstant Yes Yes Yes Yes

R2 0.213 0.481 0.590 0.591



Drivers of changes in NPO - Spatial ML

Changes in NPO 2005-2011 (5) (6) (7)NPO 2005 -0.115*** -0.122*** -0.106***

(0.0245) (0.0274) (0.0329)COST 0.0153 0.00802 -0.00250

(0.0263) (0.0296) (0.0337)STRUCTURE -0.0202 -0.0214 -0.0236

(0.0230) (0.0241) (0.0270)CAP EDU INNO 0.0840*** 0.0905*** 0.0821**

(0.0302) (0.0319) (0.0324)CAP SOCIAL -0.00527 -0.00293 0.00344

(0.0145) (0.0155) (0.0177)CAP ECO 0.0289** 0.0275* 0.0246

(0.0144) (0.0152) (0.0172)CAP INST 0.0271** 0.0351* 0.0667**

(0.0128) (0.0183) (0.0295)CAP INFRASTR -0.0234* -0.0245* -0.0207

(0.0137) (0.0144) (0.0163)ρ 0.844*** 0.806*** 0.859***

(0.0347) (0.0682) (0.0395)λ 0.166

(0.210)WX No No YesEast & South Dummies No No NoConstant Yes Yes YesAIC -1065.2 -1101.9 -1101.6



Actual vs. predicted changes in NPO scores

Value > 0 (< 0) = region performed better (worse) in developing NPO 2005-2011 than predicted by results ofspecification (2), i.e. given endowments in COST, STRUCTURE and the individual capabilities.



Summary & Policy Conclusions

Indicator on Outcome Competitiveness under NewPerspectives (NPO)

NUTS2 regions in 16 EU countries

Top regions in Western/Northern Europe; East/South laggingbehind

Regions in East (South) rank poorly in eco (social) pillar

Substantial differences to other recent indices due to inclusionof ecological dimension

Determinants of recent changes: mainly education &innovation capabilities; institutional quality; to some extenteco and social capabilities;

Cost competitiveness not found a significant predictor

High-road strategies are feasible

Competitiveness as important concept if well defined



Limitations & Outlook

Only first attempt to measure NPO at regional level

Should serve as starting point for further research/discussion

Regional data on social & eco dimension still extremely scarce

Focus on indicators that vary at the regional level

Omission of national data may ignore factors relevant at theregional level

No wide set of robustness checks as Regional CompetitivenessIndex yet



Thank you for your attention!

[email protected]@wifo.ac.at


Documents

Regional Competitiveness - Startseite · Europe 2020 Regional Index (Athanasoglou & Dijkstra, 2014,2015) Measures regions’ progress in achieving EU 2020 objectives Ecological EU