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Quality of government and social capital as drivers of regional diversification in Europe

Nicola Cortinovis (), Jing Xiao, Ron Boschma () and Frank van Oort

No 1610, Papers in Evolutionary Economic Geography (PEEG) from Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography

Abstract: Industrial diversification is considered crucial for economies to prosper. Recent studies have shown that regional economies tend to diversify into sectors that are related to those already present in the region. However, no study yet has investigated the impact of regional institutions. The objective of the paper is to bring together the literatures on related diversification and institutions by analyzing how formal and informal institutions influence regional diversification. Analyzing 118 European regions in the period 2004 and 2012, we find evidence that institutions matter for regions to diversify into new industries. Bridging social capital is a key driver of regional diversification, in addition to relatedness, in contrast to quality of government in regions. Bonding social capital has a negative impact in regions with a low quality of government. This suggests that regional institutions relevant for structural change in regions are predominantly informal in character rather than formal, and bridging rather than bonding.

Keywords: regional diversification; social capital; quality of government; institutions (search for similar items in EconPapers)
JEL-codes: R11 O14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eur, nep-geo, nep-pr~, nep-soc, nep-tid and nep-ure
Date: 2016-05, Revised 2016-05
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http://econ.geo.uu.nl/peeg/peeg1610.pdf Version May 2016 (application/pdf)

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Journal Article: Quality of government and social capital as drivers of regional diversification in Europe (2017) Downloads
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