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

Author

Listed:
  • Andrea Coveri

    (Department of Economics, Society & Politics, Università di Urbino Carlo Bo)

  • Elena Paglialunga

    (Department of Economics, Roma Tre University, Italy)

  • Antoenllo Zanfei

    (Department of Economics, Society & Politics, Università di Urbino Carlo Bo)

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.

Suggested Citation

  • Andrea Coveri & Elena Paglialunga & Antoenllo Zanfei, 2024. "Functional specialization and upgrading in European regions:new insights from FDI data," Working Papers 2401, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2024.
    • Handle: RePEc:urb:wpaper:24_01
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    File URL: http://www.econ.uniurb.it/RePEc/urb/wpaper/WP_24_01.pdf
    File Function: First version, 2024
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    More about this item

    Keywords

    Geography of functions; Inter-regional inequality; Foreign direct investment; Global value chains; European regions;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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