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Regions and cities worldwide face considerable difficulties in generating sufficient economic progress to maintain and/or improve the quality of life of their inhabitants. The middle-income trap concept allows us to analyze different perspectives of the regions and cities facing development challenges.

This paper examines the relationship between credit constraints - proxied by the investment-to-cash flow sensitivity – and firm-level economic performance - defined in terms of labor productivity – during the period 2009-2016, using a sample of 22,380 manufacturing firms from 11 European countries. It also assesses how regional institutional quality affects productivity at the level of the firm both directly and indirectly. The empirical results highlight that credit rationing is rife and represents a serious barrier for improvements in firm-level productivity and that this effect is far greater for micro and small than for larger firms. Moreover, high-quality regional institutions foster productivity and help mitigate the negative credit constraints-labor productivity relationship that limits the economic performance of European firms. Dealing with the European productivity conundrum thus requires greater attention to existing credit constraints for micro and small firms, although in many areas of Europe access to credit will become more effective if institutional quality is improved.

The effect of decentralisation on regional economic growth is a hotly debated topic. In theory, decentralisation should entail welfare benefits by bringing government closer to the people. In practice, the benefits of decentralisation have been hard to prove. A problem is that the quality of regional governments is often lacking, or at least varies widely across different regions. Hence, regional governments may not be capable of delivering public goods in an efficient and accountable manner. Previous analyses have, however, neglected how the benefits of decentralisation may depend on the quality of the regional government whose authority is strengthened by such reforms. This paper considers these two dimensions in conjunction, highlighting that the effect of decentralisation on economic performance is highly mediated by the quality of the devolved government. Using panel data for 223 regions in the EU, the results show that the quality of regional government is a better predictor of economic development than decentralisation. Regional government quality also conditions the economic returns to decentralisation, meaning decentralisation works best in regions with a higher quality of government. Accordingly, decentralisation reforms must consider the quality of the regional government to which they would devolve authority, Se ha debatido mucho sobre los efectos de la descentralización en el cre-cimiento económico. En teoría, una mayor descentralización – por mor de acercar el gobierno a la ciudadanía – comporta mejoras en la calidad de vida. En la práctica, los beneficios de la descentralización han sido, sin embargo, cuestionados. Uno de los principales problemas ligados a la autonomía re-gional es la variación en la calidad de los gobiernos subnacionales. Muchos de estos gobiernos no son capaces de proporcionar bienes públicos de manera eficaz y responsable. Sin embargo, la gran mayoría de los estudios sobre los beneficios potenciales de la autonomía regional ha obviado la calidad de go-bierno como un factor que media en su impacto. Este artículo considera por primera vez estas dos dimensiones en conjunto, recalcando que el efecto de la descentralización sobre el crecimiento económico depende en gran medida de la calidad del gobierno descentralizado. Mediante un análisis de datos de panel para 223 regiones en la UE, los resultados muestran que la calidad de los gobiernos regionales en Europa predice en mayor medida que el grado de descentralización el crecimiento económico. La calidad de los gobiernos regionales también determina los rendimientos económicos de los procesos de autonomía: la descentralización funciona mejor en regiones con gobiernos más eficaces y responsables. En consecuencia, cualquier proceso de descen-tralización debería tener muy en cuenta la calidad de los gobiernos regionales a los que se van a transferir competencias

There is increasing interest in the potential of artificial intelligence and Big Data (e.g., generated via social media) to help understand economic outcomes and processes. But can artificial intelligence models, solely based on publicly available Big Data (e.g., language patterns left on social media), reliably identify geographical differences in entrepreneurial personality/culture that are associated with entrepreneurial activity? Using a machine learning model processing 1.5 billion tweets by 5.25 million users, we estimate the Big Five personality traits and an entrepreneurial personality profile for 1,772 U.S. counties. We find that these Twitter-based personality estimates show substantial relationships to county-level entrepreneurship activity, accounting for 20% (entrepreneurial personality profile) and 32% (all Big Five trait as separate predictors in one model) of the variance in local entrepreneurship and are robust to the introduction in the model of conventional economic factors that affect entrepreneurship. We conclude that artificial intelligence methods, analysing publically available social media data, are indeed able to detect entrepreneurial patterns, by measuring territorial differences in entrepreneurial personality/culture that are valid markers of actual entrepreneurial behaviour. More importantly, such social media datasets and artificial intelligence methods are able to deliver similar (or even better) results than studies based on millions of personality tests (self-report studies). Our findings have a wide range of implications for research and practice concerned with entrepreneurial regions and eco-systems, and regional economic outcomes interacting with local culture.

Transport infrastructure investment is a cornerstone of growth-promoting strategies. However, the link between infrastructure investment and economic performance remains unclear. This may be a consequence of overlooking the role of government institutions. This paper assesses the connection between regional quality of government and the returns of different types of road infrastructure in the regions of the European Union. The results unveil the influence of regional quality of government on the economic returns of transport infrastructure. In weak institutional contexts, investment in motorways – the preferred option by governments – yields significantly lower returns than the more humble secondary roads. Government institutions also affect the returns of transport maintenance investment.

It has often been argued that “there is something in the air” which makes firms in high-density environments—such as cities or clusters—more innovative. The co-location of firms facilitates the emergence of serendipity and casual encounters which promote innovation in firms. We assess this hypothesis using data from a survey of Norwegian firms engaged in innovation partnerships. The results indicate that there may be “much less in the air” than is generally assumed in the literature. The relationships conducive to innovation by Norwegian firms emerged as a consequence of purpose-built searches and had little to do with chance, serendipity, or “being there.”

This paper examines the link between the endowment of creative and science based STEM - Science, Technology, Engineering and Mathematics - workers and the level of the firm and firm- and city-/regional-level innovation in Germany. It also looks into whether the presence of these two groups of workers has greater benefits for larger cities than smaller locations, thus justifying policies to attract these workers in order to make German cities "smarter". The empirical analysis is based on a probit estimation, covering 115,000 plant-level observations between 1998 and 2015. The results highlight that firms that employ creative and STEM workers are more innovative than those that do not. However, the positive connection of creative workers to innovation is limited to the boundaries of the firm, whereas that of STEM workers is as associated to the generation of considerable innovation spillovers. Hence, attracting STEM workers is more likely to end up making German cities smarter than focusing exclusively on creative workers. Die vorliegende Arbeit beschäftigt sich mit dem Effekt von Beschäftigten in kreativen und MINT-Berufen (Mathematik, Informatik, Naturwissenschaft, Technik) auf die Innovationsfähigkeit von deutschen Betrieben. Dabei wird neben der Beschäftigung im eigenen Unternehmen untersucht, inwiefern sich die Präsenz beider Gruppen in der Industrie und Region positiv auf Innovationskraft auswirkt und ob Unternehmen einen zusätzlichen Nutzen deshalb haben, weil sie in größeren Regionen angesiedelt sind. Aus politischer Sicht ergibt sich daraus ein mögliches Handlungsfeld, wenn es das Ziel ist, die Innovationsfähigkeit zu steigern. In der empirischen Analyse werden etwa 115,000 Betriebe in den Jahren 1998-2015 betrachtet. Die Ergebnisse indizieren, dass sowohl kreative als auch MINT Beschäftigte einer Firma positiv auf die Innovationsfähigkeit der Betriebe wirken. Ferner weist die Evidenz darauf hin, dass es keinen Spillover-Effekt von kreativen Beschäftigten außerhalb der Betriebe in den Betrieb hinein gibt, dies jedoch für MINT-Beschäftigte signifikant der Fall ist. Das bedeutet, dass eine stärkere regionale und industriespezifische Konzentration von MINTBeschäftigten Betriebe generell innovativer macht.

This paper investigates the impact of the offshoring of production activities on domestic jobs in Great Britain. The paper considers both the spatial heterogeneity across local labour markets and variations in the intensity of outward flows of investments abroad (OFDI) across industries in order to shed new light on the job creation/destruction implications of offshoring. The results suggest that offshoring may generate significant job losses in routine occupations in areas that have been more exposed to the relocation of production abroad, regardless of whether the relocation has been to developed or developing/emerging countries. Offshoring to developing/emerging countries has, by contrast, a positive effect on the generation of non-routine jobs. Efficiency gains accruing from the international reorganization of production increase in the long-run, with compensation mechanisms operating through growth of employment in higher value added activities at home. Overall, our results uncover important spatial and interpersonal inequalities in job creation, which provide new challenges for public policy.

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.

Research and innovation strategies for smart specialisation (RIS3) are trying to introduce a new vision of innovation policy in European regions. However, the success of RIS3 policy measures is closely dependent on the capacity of regional government institutions to act as coordinators or facilitators of the interventions. The way in which institutional mechanisms govern innovation processes and provide incentives for the interaction between regional actors remains a largely unexplored area of scientific research. This policy note discusses the importance of sound institutional frameworks for the effectiveness of smart specialisation, presenting an econometric study that investigates the link between government institutions and innovation. The empirical results confirm the key role played by governance structures for technological advances at the regional level, suggesting that the greatest gains in innovative capacity from institutional reforms would be obtained in peripheral territories where the initial level of government quality is lower. This analysis has important implications for the identification of the necessary pre-requisites for successful RIS3 strategies in EU regions., JRC.J.2-Knowledge for Growth

This article tries to analyse, with the use of cluster analysis techniques, the relationship between economic growth and the social structure at a regional level in Western Europe. It is argued that the process of socioeconomic restructuring has rendered the connection between growth and the underlying social structure more visible. The results show that this association is not only evident in the so-called "new growth spaces", as pinpointed by most of the literature on structural change, but also in different sets of European regions. Moreover, the results reveal that there is not a unique social structure associated to low or high growth, and that similar levels of economic growth might be achieved under very different social conditions.

Does the nationality of migrants arriving in any particular territory make a difference for long-term economic development? Have Irish, German or Italian settlers arriving in the US at the turn of the 20th century left an institutional trace which determines economic development differences to this day? This paper explores whether the distinct geographical settlement patterns of European migrants according to national origin affected economic development across US counties. It uses historical microdata ? provided in the Integrated Public Use Microdata Series (IPUMS) database ? of the US censuses which coincided with the greatest waves of European migration (1880, 1910) in order to uncover the settlement patterns of migrants of different national origins across the more than 3,000 US counties. We look at the national origin of migrants living in any given US county and at their percentage in the local population of the county at the turn of the 19th century so as to assess whether a greater presence of migrants from specific national origins has influenced and/or continues to influence development patterns across US counties to this day. The analysis also controls for a number of factors which would have determined both the attractiveness of different US counties at the time of migration, as well as current levels of development, including income per capita, population, the unemployment rate, the educational attainment of the population, the percentage of blacks, female labour participation, and employment in agriculture as independent variables. The results indicate that while there is a strong and positive correlation between where migrants settled and current levels of development, this correlation seems to be completely independent of the national origin of migrants. Specific migrant origins ? with the only exception of the English, precisely those with the least problems of adaptation to the new environment ? do not make a difference for long-term economic development whatsoever. This holds for the first and second wave of migration. Hence being settled by Germans, Irish, Scandinavians, Poles, or Italians has always been favourable for subsequent economic development. The main difference is simply between counties which received a large influx of migrants, which tend to be significantly richer today, and those that did not.

This paper investigates how physical, organisational, institutional, cognitive, social, and ethnic proximities between inventors shape their collaboration decisions. Using a new panel of UK inventors and a novel identification strategy, this paper systematically explores the net effects of all these 'proximities' on co-patenting. The regression analysis allows us to identify the full effects of each proximity, both on choice of collaborator and on the underlying decision to collaborate. The results show that physical proximity is an important influence on collaboration, but is mediated by organisational and ethnic factors. Over time, physical proximity increases in salience. For multiple inventors, geographic proximity is, however, much less important than organisational, social, and ethnic links. For inventors as a whole, proximities are fundamentally complementary, while for multiple inventors they are substitutes.

Trust in public institutions and public policies are generally perceived as a precondition for economic recovery in times of recession. Recent empirical evidence tends to find a positive link between decentralization and trust. But our knowledge about whether decentralization – through increased trust – improves the perception of the delivery and effectiveness of public policies is still limited. In this paper we estimate the impact of fiscal and political decentralization on the perception of the state of the education system and of health services, by using the 2002, 2004, 2006 and 2008 waves of the European social survey. The analysis of the views of 160,000 individuals in 31 European countries indicates that while the effect of fiscal decentralization on the perception of the state of the health and education system is limited, political decentralization clearly affects citizen’s satisfaction with education and health delivery. The influence of political decentralization, however, is highly contingent on whether we consider the capacity of the local or regional government to exercise authority over its citizens (self-rule) or to influence policy at the national level (shared-rule). Keywords: Education, health, satisfaction, fiscal and political decentralization, Europe. JEL codes: H11, H77

Most immigration theories tend to highlight that migration follows wealth and economic dynamism, but is this also the case across regions in Europe? The aim of the paper is to investigate whether migrants in Europe indeed follow the money and to contrast this with a variety of potential alternative explanations, including the presence of migrants from a similar origin. The analysis is based on panel data estimations including 133 European regions over a time period of 17 years. Different lag structures have been employed in order to distinguish between short- and long-run effects. The results cast some doubt about the prominence of pecuniary factors as a determinant of cross regional migration in Europe, with little evidence to support the idea that migration follows economic dynamism. Network effects, human capital related-, and 'territorially embedded' innovation enhancing regional characteristics, by contrast, seem to play a much stronger role than hitherto considered. The study also reveals important differences among EU countries in the factors which determine regional migration.

This paper analyses whether the different powers and resources at the disposal of local and regional governments across Europe deliver greater satisfaction with political institutions and lead to greater personal happiness. The analysis uses microdata from the four available waves of the European social survey (2002, 2004, 2006 and 2008), including more than 160,000 observations of individuals living in 29 European countries. Our results reveal that political and fiscal decentralization have a positive and significant effect on individuals' overall happiness. Fiscal decentralization also exerts a significant effect on the level of satisfaction with political and economic institutions and with the education and health systems, whereas the effect of political decentralization on these variables is more limited. The results show that citizens seem to be happier with the actual capacity of their local governments to deliver than with the general principle that they can have a say on their daily politics and policies.