# 22.13 Extractive Industries and Regional Diversification: A Multidimensional Framework for Diversification in Mining Regions

Moritz Breul & Miguel Atienza 

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Economic diversification is seen as imperative for mining regions to achieve an economically sustainable form of development. Yet, existing knowledge is largely drawn from national scale analyses, thereby concealing interregional differences as well as mechanisms between resource extraction and diversification operating at the regional scale. This special issue on ‘Extractive Industries and Regional Diversification’ therefore shows recent work that brings the study of the relationship between extractive industries and diversification to a regional level. In this introductory article, we propose a multidimensional framework that seeks to refine our understanding of mining regions’ (in)ability to diversify their economies by bringing together insights from research on the relationship between resource extraction and development and research on regional diversification in economic geography. We argue that the effect of extractive industries on regional diversification is mediated along three dimensions, that is (1) the regional context conditions, (2) the multi-scalar organization of extractive industries, and (3) the relevance of temporality. The framework is applied to synthesize the key insights of the special issue articles and directions for future research are derived.

# 22.12 Can decentralisation help address poverty and social exclusion in Europe?

Vassilis Tselios & Andrés Rodríguez-Pose

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Poverty reduction and the tackling of social exclusion are overarching goals of development and welfare policies. This paper explores the extent to which decentralisation contributes to poverty and social exclusion alleviation in European countries and regions. We find evidence that increases in central government transfers of political, administrative, and fiscal authority to subnational tiers of government reduce poverty and address social exclusion at an aggregate level. This, however, mainly happens in countries with a high degree of governance quality and, fundamentally, in urban areas. The link between decentralisation and poverty and social exclusion alleviation is more uniform at the regional level, as greater regional autonomy is connected to lower poverty and social exclusion, regardless of the quality of regional government. Hence, when regional governments have the capacity to design their own independent policies, a reduction of poverty and social exclusion and improvements in well-being generally ensue.

# 22.11 Disruptive innovation and spatial inequality

Tom Kemeny, Sergio Petralia & Michael Storper

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Although technological change is widely credited as driving the last two hundred years of economic growth, its role in shaping patterns of inequality remains under-explored. Drawing parallels across two industrial revolutions in the United States, this paper provides new evidence of a relationship between highly disruptive forms of innovation and spatial inequality. Using the universe of patents granted between 1920 and 2010 by the U.S. Patent and Trademark Office, we identify disruptive innovations through their rapid growth, complementarity with other innovations, and widespread use. We then assign more- and less-disruptive innovations to subnational regions in the geography of the U.S. We document three findings that are new to the literature. First, disruptive innovations exhibit distinctive spatial clustering in phases understood to be those in which industrial revolutions reshape the economy; they are increasingly dispersed in other periods. Second, we discover that the ranks of locations that capture the most disruptive innovation are relatively unstable across industrial revolutions. Third, regression estimates suggest a role for disruptive innovation in regulating overall patterns of spatial output and income inequality

# 22.10 Workplace Skills as Regional Capabilities: Relatedness, Complexity and Industrial Diversification of Regions

Duygu Buyukyazici, Leonardo Mazzoni, Massimo Riccaboni & Francesco Serti

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The literature reaches a unanimous agreement that industrial diversification is path-dependent because new industries build on preexisting capabilities of regions that are partly embodied and reflected in the skills of regions’ workforce. This paper explicitly accounts for regional capabilities as workforce skills to build skill relatedness and complexity measures, skill-spaces, for 107 Italian regions for the period 2013-2019. Data-driven techniques we use reveal that skill-spaces form two highly polarised clusters into social-cognitive and technical-physical skills. We show that industries have a higher (lower) probability of developing comparative advantage if their required skill set is (not) similar to those available in the region regardless of the skill type. We find evidence that similarity to technical-physical skills and higher complexity in social cognitive skills yields the highest probabilities of regional competitive advantage.

# 22.09 The Regional Development Trap in Europe

Andreas Diemer, Simona Iammarino, Andrés Rodríguez-Pose & Michael Storper

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The concept of regional development trap refers to regions that face significant structural challenges in retrieving past dynamism or improving prosperity for their residents. This article introduces and measures the concept of the regional development trap for regions in Europe. The concept draws inspiration from the middle-income trap in international development theory but widens it to shed light on traps in higher-income countries and at the regional scale. We propose indicators—involving the economic, productivity, and employment performance of regions relative to themselves in the immediate past, and to other regions in their respective countries and elsewhere in Europe—to identify regions either in a development trap or at significant near-term risk of falling into it. Regions facing development traps generate economic, social, and political risks at the national scale but also for Europe as a whole.

# 22.08 Relatedness in regional development: in search of the right specification

Yang Li & Frank Neffke

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A large body of research has documented that the size and growth of an industry in a city or region depends on the local size of related industries. However, there is no consensus on how to best measure, either the relatedness between industries, or how well a particular industry fits a local economy as a whole. In this paper, we perform a structured search over tens of thousands of specifications to identify optimal – in terms of out-of-sample predictions – ways to construct these quantities, using a dataset that allows us to derive relatedness from co-occurrence patterns of industries in establishments, firms, regions and countries. We find that these different levels of aggregation yield different relatedness matrices, each of which can help predict the size and growth of local industries. At the same time, we identify specification elements that improve the performance of such predictions. Moreover, we uncover important trade-offs between predictive performance and interpretability of relatedness patterns that have consequences for the policy frameworks they support and for our theoretical understanding of what underlies path-dependent economic development in cities and regions.

# 22.07 Workplace Skills as Regional Capabilities: Relatedness, Complexity and Industrial Diversification of Regions

Duygu Buyukyazici, Leonardo Mazzoni, Massimo Riccaboni & Francesco Serti

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Abstract:

The literature reaches a unanimous agreement that industrial diversification is path-dependent because new industries build on preexisting capabilities of regions that are partly embodied and reflected in the skills of regions’ workforce. This paper explicitly accounts for regional capabilities as workforce skills to build skill relatedness and complexity measures, skill-spaces, for 107 Italian regions for the period 2013-2019. Data-driven techniques we use reveal that skill-spaces form two highly polarised clusters into social-cognitive and technical-physical skills. We show that industries have a higher (lower) probability of developing comparative advantage if their required skill set is (not) similar to those available in the region regardless of the skill type. We find evidence that similarity to technical-physical skills and higher complexity in social cognitive skills yields the highest probabilities of regional competitive advantage.

# 22.06 Regional diversification in Brazil: the role of relatedness and complexity

Mariane Santos Françoso, Ron Boschma & Nicholas Vonortas

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The paper contributes to the growing literature on the relationship between relatedness, complexity and regional diversification. It explores regional diversification in an emerging economy, focusing on diversification opportunities of regions with distinct levels of local capabilities. We investigate the importance of relatedness and economic complexity for sectoral and technological diversification in all regions of Brazil during the period 2006-2019. Regions tend to diversify in sectors/technologies requiring similar capabilities to those already available locally. In general, the higher the sector/technology complexity, the lower the probability of diversification. However, in high-complex regions, complexity reverses into a positive force for diversification. Our analysis shows catching-up and diversification prospects vary widely across different types of regions in Brazil.effect is supported by cognitive proximity as the share of EU-born foreign population is driving this result. Moreover, our analysis suggests that the effect of cultural diversity on innovative entrepreneurship is not due to human capital availability or moderated by entrepreneur’s absorptive capacity but rather stems from the diversity in cultural background itself. 

# 22.05 Cultural diversity and innovation-oriented entrepreneurship

Paula Prenzel, Niels Bosma, Veronique Schutjens & Erik Stam 

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A growing empirical literature has established a positive relationship between cultural diversity and entrepreneurship rates, often attributing this effect to innovative benefits of diversity. However, not all entrepreneurship is inherently innovative, raising the question of whether cultural diversity may increase the relative prevalence of entrepreneurs pursuing innovative instead of more replicative strategies. This study investigates the relationship between regional cultural diversity and the innovation-orientation of early-stage entrepreneurs and considers moderating factors by decomposing shares of foreign-born population by origin within and outside of the EU and by education level. Combining survey data from the Global Entrepreneurship Monitor with various measures of cultural diversity, we carry out a multilevel analysis for 166 European regions. The results suggest that entrepreneurs in more culturally diverse regions are significantly more likely to exhibit innovation-orientation. We find some evidence that this effect is supported by cognitive proximity as the share of EU-born foreign population is driving this result. Moreover, our analysis suggests that the effect of cultural diversity on innovative entrepreneurship is not due to human capital availability or moderated by entrepreneur’s absorptive capacity but rather stems from the diversity in cultural background itself. 

# 22.04 Uncooperative Society, Uncooperative Politics or Both? Trust, Polarisation, Populism and COVID-19 Deaths across European regions

Nicholas Charron, Victor Lapuente & Andrés Rodríguez-Pose 

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Why have some territories performed better than others in the fight against COVID-19? This paper uses a novel dataset on excess mortality, trust and political polarization for 165 European regions to explore the role of social and political divisions in the remarkable regional differences in excess mortality during the first wave of the COVID-19 pandemic. First, we investigate whether regions characterized by a low social and political trust witnessed a higher excess mortality. Second, we argue that it is not only levels, but also polarisation in trust among citizens – in particular, between government supporters and non-supporters – what matters for understanding why people in some regions have adopted more pro-healthy behaviour.  Third, we explore the partisan make-up of regional parliaments and the relationship between political division – or what we refer to as ‘uncooperative politics’. We hypothesize that the ideological positioning – in particular those that lean more populist – and ideological polarization among political parties is also linked to higher mortality. Accounting for a host of potential confounders, we find robust support that regions with lower levels of both social and political trust are associated with higher excess mortality, along with citizen polarization in institutional trust in some models.  On the ideological make-up regional parliaments, we find that, ceteris paribus, those that lean more ‘tan’ on the ‘gal-tan’ spectrum yielded higher excess mortality. Moreover, although we find limited evidence of elite polarization driving excess deaths on the left-right or gal-tan spectrums, partisan differences on the attitudes towards the EU demonstrated significantly higher deaths, which we argue proxies for (anti)populism.  Overall, we find that both lower citizen-level trust and populist elite-level ideological characteristics of regional parliaments are associated with higher excess mortality in European regions during the first wave of the pandemic.