Analysing evolutionary growth regimes of regional economies and transformative shocks: Proposal for a regression-based counterfactual simulation approach to local inter-industry structural change

Inter-industry relationships constitute growth regimes in regional evolutionary developments. The paper proposes a regression-based counterfactual simulation approach with location-level industry data in order to analyse systematically how the relationships between different industries and the growth regimes these relationships constitute differ across regions, and how these differences affect the response of regional development to interventions. At the core of the approach are complete descriptive panel regression models that decompose agglomeration effects into industry, spillover, and structure effects. With the identified coefficients simulations are carried out. To demonstrate its advantages, we apply the approach to the analysis of path-dependent employment growth in a livestock-intensive German location facing capacity constraints. In some of the scenarios, where individual industries are affected by exogenous shocks, we observe compensatory growth in other industries. This confirms the occurrence of evolutionary dynamics and the relevance of approaches that recognise and reproduce them.