Functional specialization and upgrading in European regions:new insights from FDI data

Andrea Coveri, Elena Paglialunga and Antonello Zanfei ()
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Antonello Zanfei: Department of Economics, Society & Politics, Università di Urbino Carlo Bo

No 2401, Working Papers from University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini

Abstract: The geographic dispersion of production activities has led regions to increasingly specialize in specific value chain functions, giving rise to a finer spatial division of labour. In this work, we use georeferenced FDI data to investigate the geography of functions and the interdependencies between functional and sectoral specialization of European regions. We show that the most intangible-intensive functions at the upper ends of value chains are concentrated in few advanced regions, while lower-income ones are largely and persistently specialized in production operations. Moreover, we find that regions locked-into low value-adding functions are the least likely to upgrade towards more knowledge-intensive industries. By contrast, only the few regions which experienced functional upgrading trajectories have been able to diversify towards more innovative industries. Accordingly, regional policies should aim at favouring functional upgrading of laggard regions as a key vehicle for economic and spatial convergence in Europe.

Keywords: Geography of functions; Inter-regional inequality; Foreign direct investment; Global value chains; European regions (search for similar items in EconPapers)
JEL-codes: F21 F23 L23 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2024, Revised 2024
New Economics Papers: this item is included in nep-eec, nep-geo, nep-int, nep-tid and nep-ure
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http://www.econ.uniurb.it/RePEc/urb/wpaper/WP_24_01.pdf First version, 2024 (application/pdf)

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