Explanatory factors of regional development and poverty risk in European regions.

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Gross domestic product (GDP) per capita in the regions of the European Union in
Gross domestic product (GDP) per capita in the regions of the European Union in 2018. EuroGeographics for administrative boundaries. The mainland EU regions of Pohjois-ja Itä-Suomi (Finland) and Mazowiecki regionalny (Poland) are excluded / Eurostat.

A study by the Autonomous University of Madrid (UAM) shows that improvements in technology, institutional quality and geographic endowment improve regional economic development and reduce the risk of poverty and social exclusion in Europe. The results are useful for formulating regional development strategies that in turn promote the reduction of inequality.

Since the creation of the European Union, one of the main concerns has been to reduce the existing gaps at regional level in terms of inequalities in per capita income. This interest has been latent in the formulation of the Cohesion Policy, one of the main pillars of inequality reduction.

Thus, initiatives such as the Structural Funds, replaced by the Cohesion Funds in 1994, have provided financial assistance to lower-income European regions to encourage investment in transport and sustainability projects.

However, the reduction of these regional gaps has not reached the expected values, since there are a large number of regions whose percentage of the population at risk of exclusion is above the threshold desired by the community authorities.

This fact has given rise to an important debate when it comes to reconfiguring regional development strategies in the Cohesion Policy, formulated for six-year periods and ending in 2027 the current policy in force.

A recent study by Javier Barbero Jiménez and Ernesto Rodríguez Crespo, professors at the Faculty of Economics and Business Administration of the Autonomous University of Madrid (UAM), argues that the use of technology and improvements in the quality of institutions and geographic endowment can be useful for the purpose of improving economic development and also for reducing inequality.

The paper, published in The Annals of Regional Science, presents a novel perspective by considering economic development and regional inequality simultaneously.

Adapting policies to the context

For the authors, the most important aspect lies in adapting cohesion policies to the context of specific places and areas in order to establish the most appropriate regional development strategies.

"There are a high number of strategies, such as improving access to technology by benefiting from the expansion of new technologies in Industry 4.0, more effective governance aimed at raising the quality of institutions, reducing corruption and improving their efficiency, and, finally, an increase in regional accessibility from the construction and improvement of transport infrastructure."

"However," the authors add, "the impact of these strategies has usually been explored in isolation and, more importantly, neglecting their implications for reducing the risk of exclusion.

It is therefore essential to understand the impact of these strategies as a whole in order to formulate a more efficient and inclusive future Cohesion Policy that can reduce regional disparities in Europe and enable progress towards a greater degree of Community integration.

Towards more comprehensive and inclusive strategies

The analysis methodology applied by the researchers consisted mainly of a quantitative strategy, developed from a linear regression model with panel data, incorporating various socioeconomic data from the European Union regions over consecutive time periods.

This methodology made it possible to study whether there is a causal relationship, i.e., whether or not the potential determinants can have an effective impact on regional development.

The explanatory variables are related to three independent and non-exclusive dimensions, such as access to technology, quality of institutions and geographic accessibility.

The researchers conducted two separate analyses considering the degree of regional development and, on the other hand, the risk of poverty and social exclusion of European regions as explanatory variables.

"If we consider the three strategies (improvements in access to technology, institutional quality and transportation), we can see how they are all important in promoting regional development strategies, although the impact differs depending on which strategy is used," the authors note.

"However," they conclude, "it is essential to identify how these strategies can effectively reduce the population at risk of poverty, since increasing per capita income does not necessarily bring about reductions in inequality.

Bibliographic reference:

Barbero, J., Rodríguez-Crespo, E. 2022. Technological, institutional, and geographical peripheries: regional development and risk of poverty in the European regions. The Annals of Regional Science. doi: 10.1007/s00168’022 -01127-9.

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