ESPON Evidence for Regional Policy-Making: Factors Driving Economic Success in Convergence Regions

1. Open Seminar “ESPON Evidence for Regional Policy-Making” – Contributing to the Europe 2020 Strategy in Alcalá de Henares, Spain SEARCH | Structured empirical analysis for convergence regions: identifying success factors for consolidated growthLead Partner: Naples University “Federico II” L.U.P.T.Partner: Basel University

2. ESPON – SEARCH: Content Objectives / Approach Lessons learned from the… …literature on regional success factors …regional survey on success factors in the stakeholder regions …case studies on information and innovation society …econometric analysis on regional success factors Options for policy development and further research possibilities

3. ESPON – SEARCH: Objectives The main objectives of the project were first to understand the factors relevant for the overall economic success for convergence regions’ economies and second to identify determinants of a successful (efficient and effective) cohesion policy in convergence regions.

4. ESPON – SEARCH: lessons learned… • …from the literature • Three different groups of factors • Economic drivers • ..such as knowledge and innovation potentials, accessibility, connectivity etc. • 2. Economic enablers • ..such as taxation for companies, regulation of labour markets etc. • 3. Factors relevant for a successful cohesion policy • …such as the efficiency of regional administrations, level of decentralisation etc.

5. ESPON – SEARCH: hypotheses… …from the literature on regional growth factors

6. ESPON – SEARCH: hypotheses… …from the literature on different region types and on factor interreations • first there are different regional success factors for • - weak convergence regions, • - catching up convergence regions and • - above average GDP regions • second Factors important for an efficient allocation of EU funds are a precondition for other factors!

7. ESPON – SEARCH: lessons learned… …from the regional survey: questionnaires Weak and catching up convergence regions differ in regard to growth factors!

8. ESPON – SEARCH: lessons learned… …from the interviews • Impediments to regional development in weak convergence regions are: • geographic isolation • underdeveloped transport infrastructure (rail, road and airport connections) • organised crime, loss of civic sense • high share of agricultural sector • depopulation • Insufficient exploitation of e.g. innovation resources etc. • Success factors for catching up convergence regions are e.g. • economic structure: construction sector boosted the whole economy • regional administration: efficient activities (especially in spending funds) • common effort of all regional institutions towards an innovation strategy • high investment in R&D • decentralisation

9. ESPON – SEARCH: lessons learned… …from the interviews: conclusions • potential for economic success exists in each of the four stakeholder regions! • But: different exploitation (in terms of efficiency) of resources in weak and catching up convergence regions due to for example the • - different levels of skill and economic incentives of civil servants and regional officials, • - kind of interaction of regional institutions, • - different level of decentralisation, • - transparency in processes and controls etc. -> Weak and catching up convergence regions differ in regard to the exploitation of resources! -> It seems that factors important for an efficient allocation of funds are a precondition for other factors

10. ESPON – SEARCH: lessons learned… …from the case studies (information and innovation society): • Common impediments in the weak convergence regions are • too little decentralisation (regional autonomy) • a lack of private business involvement and initiatives • a lack of public and private funding • lack of joined-up strategy in innovation and IS and links to other strategies • difficulties in setting-up permanent structures that can survive independently of EU funds (sustainability). • ->In contrast, in Valencia, e.g.permanent structures have been successfully created (competence centre for coordinated activities towards the demands of the EU, which has shown impressive results)

11. ESPON – SEARCH: lessons learned… …from econometrics: research questions • Which factors explain best the overall economic growth and successful cohesion policy of convergence regions? Which are the main drivers of economic growth in convergence regions? • Which are the differences between the factors in weak convergence regions, catching up convergenceregions and above average GDP regions? • Aim: to verify the results from the foregoing analyses on a macro level

12. ESPON – SEARCH: lessons learned… …from econometrics: Classification of regions mean mean

13. ESPON – SEARCH: lessons learned… …from econometrics: Convergence effect among European regions catching up regions n=65 strong regions n=32 losing ground regions n=89 weak regions n=44 Source: Oxford Economics 2009

14. ESPON – SEARCH: lessons learned… …from econometrics: regression analysis • Performance = α + β1*X1 + β2*X2 + … + γ1*Z1 +γ2*Z2 + … + ε, • α, β and γ are fixed but unknown parameters • ε is an error term • Xs are various economic and political variables affecting economic performance which cannot be influenced by the regional authorities (such as geographical accessibility or national regulation) • Zs are different aspects of variables that can be influenced by regional authorities (such as infrastructure or education). Source: Oxford Economics 2009

15. ESPON – SEARCH: lessons learned… from econometrics: summary: Influence on average GDP growth 2000-2007 -significant at a 10 per cent error level, --significant at a 5 per cent error level, ---significant at a 1 per cent error level

16. ESPON – SEARCH: lessons learned… We had been able to partly assess convergence. But whether this can be assigned to convergence policy has to be questioned critically. Today it is clear, that the observed stronger growth in many Mediterranean and eastern European countries was not based on a solid foundation, but on not sustainable real estate bubbles. Correspondingly, these areas now suffer more: The crisis was deeper and the recovery will take longer time. Furthermore, caps on public spending and stringent measures to reduce public debt may impact negatively in particular on convergence regions. In short, in 2012 there will be hardly any convergence effect (exception: Poland) …from econometrics: concluding remarks

17. ESPON – SEARCH: Options… …for policy development and further research possibilities • Based on the insights that • regional success factors differ between weak convergence regions, catching up convergence regions and above average GDP regions and • factors for an efficient allocation of resources are a precondition for other factors we can state that • Therefore: not one policy fits all! • For convergence regions, it is very important to continuously improve the economic drivers within the region and to establish stable regulatory frameworks which serve as breeding grounds for economic well being. • Preconditions for stable regional frameworks or systems are for example the absence of corruption and the transparency of processes (factors relevant for an efficient allocation of resources).

18. ESPON – SEARCH: Options… …for policy development and further research possibilities The transparency of processes is assumed to be more easily achievable with a high level of decentralisation and a high degree of proximity to the citizens. The absence of corruption and a high level of decentralisation appear as efficiency factors for a successful cohesion policy and an effective fund management. In order to enable innovation potentials on the regional level, it is important that the regulatory framework as an economic enabling factor is consistent also on the national level. Therefore, the good interaction and collaboration between the national, the regional and certainly the EU level is of the utmost importance, because an isolated e.g. regional innovation system does not exist.

19. ESPON – SEARCH: Dissemination Completed Activities In progress SEARCH website in test phase Local language Powerpoints in preparation of draft results for local seminars for stakeholders, Local seminar for Campania Region decision-makers, stakeholders and scientific community - July 2010 TPG – Stakeholders – Umbrella associations (AER, CPMR) meeting planned – July 2010 Participation at ESPON Open Days and TA Conference in Brussels. • Presentation Italian Info Day Rome 23 September 2009. • Presentation Italian Info Day Milan 25 September 2009. • Coordination with Stakeholders and Umbrella Groups (preparatory meeting in Brussels Oct. 09) • Presentation at Internal Seminar "The ESPON Knowledge Base as Potential for Territorial Analysis and Policymaking at Regional Level" in Malmö, 02 – 03 December 2009.

20. ESPON – SEARCH: Options… Thank you very much for your attention! tina.haisch@unibas.ch