The Role of Functions in Economic Underperformance of Southern European Regions

Structural upgrading has been considered in the literature as fundamental for the possibility of middle and high income regions and countries to thrive in the global economy. At the same time, most regions belonging to Southern European countries have clearly been losers facing integration/globalization processes, especially in the years of the economic crisis. Aim of this chapter is to show the low level of functional upgrading in southern European regions, which contributes to explain their low productivity levels and their relative low economic growth. In this chapter upgrading is proxied through the functions performed in the economy by the workers, according to their ISCO classification. The chapter first analyses the economic patterns of the regions of southern European countries, showing that they are different from those of the rest of the EU. It shows that there are lags in GDP growth which are, for a relevant part, due to low levels and increments of productivity. These weak trends in productivity are shown to depend at least in part on the specialization of Southern European regions in low-level functions and their inability to rise to higher level ones. Finally, the chapter shows that those Southern European regions which were specialized in functions of a higher level were ceteris paribus overachieving with respect the others.