No. 82. AGGLOMERATION ECONOMIES AND PRODUCTIVITY IN THE EU REGIONS
Th. Tsekeris, S. Papaioannou. 2021. | ISBN: 978-960-341-127-7
This study provides an integrated and theoretically sound methodological framework for consistently monitoring and benchmarking efficiency, total factor productivity (TFP) and technology gaps of EU regions. Within this framework, we identify main determinants of inefficiency and formulate productivity-enhancing policies. The results show that the average level of technical efficiency across the EU regions has basically remained the same (about 80%) during the period 2010-2016. Considerable spatial inequalities are observed, since regions of the northern and central-western Europe, which have efficiency scores above 90%, significantly outperform the regions located in the eastern and southern Europe. Additionally, there are significant interregional productivity gaps within specific countries, such as in the U.K., Italy, Spain, and Greece.
All Greek regions fell considerably behind the EU average, with an average level of technical efficiency approximately equal to 54% during this period. The efficiency score (66%) of the best performing region (Attiki) was more than 20 percentage points higher than the efficiency score (44%) of the lowest performing region (Peloponnisos), which was the 8th least efficient region of the EU (in 2016). The region of Kentriki Makedonia and the island regions of Notio Aigaio, Kriti, Voreio Aigaio (in 2010) and Ionia Nisia (in 2016) had efficiency scores above the country’s average. There are also considerable differences in the dynamism among regions, which imply the existence of a multi-speed convergence process within the EU. This process primarily reflects the productivity slowdown in most developed countries/regions and the catching-up of eastern EU regions.
The findings signify that the agglomeration-efficiency nexus is complex and largely context-specific. On the one hand, efficiency is positively affected by the growth of land development sprawl above a threshold point, the geographical (land-use) and sectoral concentration of broad economic activities, the enhancement of human capital and market access (or other types of geographical centrality). On the other hand, sources of inefficiency refer to the growth in employment density above a threshold point, indicating congestion effects, and the much less uniform or more specialised pattern of employment with respect to the average EU pattern.
The findings offer useful implications for policy measures which are tailored to the intrinsic characteristics, needs and comparative advantages of EU regions to address inefficiencies and inequalities among them. Harnessing agglomeration economies, improving connectivity −through strategic investment in physical infrastructure− and advancing human capital are all crucial elements for the sustainable and fair development and cohesion among the European regions. For this purpose, the formulation and implementation of investment programmes and regional-sectoral plans should involve a bundle of policy measures to work in synergy. Among others, these measures may include the strengthening of spatial planning institutions, so that land-use management promotes efficiency, and treatment of agglomeration diseconomies. Regarding Greece, the efficiency gains from establishing an integrated spatial planning framework are stressed for the management of urbanisation and land-intensive developments at the regional level.