Papers in Evolutionary Economic Geography

May 31, 2018

# 18.23 Does related variety affect regional resilience? New evidence from Italy

Filed under: 2018 — Tags: , , , — T.Broekel @ 3:45 pm

Giulio Cainelli & Roberto Ganau & Marco Modica

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Abstract: Although several contributions have studied the effect of related variety on the economic performance of firms and regions, its influence on regional resilience – that is, regions’ capacity to adapt to external shocks – has received little attention. This paper contributes to this debate by analysing empirically the relationship between related variety and regional resilience at the Italian Local Labour Market (LLM) level. The analysis adopts the definition of regional resilience developed by Martin (2012), and employs spatial econometric techniques − besides standard non-spatial models − to analyse the role played by related variety as a short-run shock absorber with respect to the 2008 Great Recession. The results obtained from the estimation of Spatial Error Models suggest that LLMs characterised by a higher level of related variety have shown a higher capacity to adapt to an external shock, that is, the Great Recession. This evidence is confirmed with respect to two different short-run time horizons, the one-year period 2012-2013 and the three-year period 2010-2013.

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September 23, 2017

# 17.24 Multinational enterprises, service outsourcing and regional structural change

Andrea Ascani, Simona Iammarino

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This paper offers a joint analysis of two phenomena characterizing most advanced economies in recent decades: the rise of foreign ownership in manufacturing activities and the pervasiveness of the service economy. The aim of the study is to examine the structural transformation of regional economic systems within the UK by focusing on the role played by foreign multinational enterprises (MNEs) in manufacturing in facilitating the development of services. From a conceptual perspective, this research relies on different strands of literature on the impact of foreign direct investment (FDI) on recipient economies, on outsourcing and regional structural transformation, and on the identification of local multipliers. The empirical analysis focuses on a specific demand-side channel for structural change: the forward linkage established by foreign manufacturing MNEs with local service providers through outsourcing. Descriptive evidence shows that service outsourcing by foreign plants operating in manufacturing is pervasive compared to outsourcing by their domestic counterparts. On this basic premise, we estimate the multiplicative effects that foreign manufacturing activity has on the creation of service jobs in local labour markets. In order to produce reliable estimates of a local multiplier, the methodology adopts an instrumental variable approach. Our findings suggest that foreign presence in manufacturing can be a catalyst of regional structural change by stimulating the generation of new jobs in the tertiary sector via demand linkages.

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