María José Ruiz Martos (p), Ángeles Sánchez

Guang Yang

The 2008 economic crisis and the more recent Covid-19 pandemic have increased EU concerns about the effects of unequal income distribution on economic growth and social development and have rendered public economic and social policies unavoidable. The current work studies the relationship between inequality in income distribution and fiscal policies in the EU regions. More concretely, we study the evolution of inequality in wages distribution in the service sector in the European regions between 2005 and 2018. Differences in wages distribution respond to regional differences but also to the dissimilar productive specializations within the service economic sector between EU regions. The choice of the service sector obeys to, first, its important share, approximately around 70%, in terms of both gross value added (GVA) and employment, in EU economies. Secondly, the required data disaggregation is not available for the secondary sector and; finally, the primary sector in not quantitatively important in EU economies in terms of GVA and employment.
We begin by measuring inequality in the wage distribution by using the Theil-decomposition. This methodology distinguishes between intra-regional inequality and interregional inequality. The intra-regional inequality measures, within a region, inequality in wages between the different activities in the service sector (i.e., determined by the productive specialization in the service sector in the region). Interregional inequality measures, within a particular activity in the service sector, inequality in wages between the EU regions (i.e., determined by regional inequality).
Once we have a Theil-measure (Conceição and Galbraith,2000) of inequality in wages distribution across EU regions, focusing on 2018 and by means of multilevel analysis, we study how this measure of wage inequality is affected by the public expenditure and the tax structure in those regions; as well as by the percentage of population with tertiary education and the political and legal stability in the region. Preliminary results suggest that crucial disparities in the Theil index are due to interregional inequality. Moreover, increases in public expenditure and tax progressivity; as well as increases in the percentage of population with tertiary education and political and legal stability, reduce wages inequality among EU regions.
References:
Conceição, P. and Galbraith, J.K. (2000). Constructing Long and Dense Time-Series of Inequality using the Theil Index. Eastern Economic Journal, 26(1), 61-74.

Ildikó Egyed (p)

María José Ruiz Martos

The objective of EU industrial policy in the 2021-2027 programming cycle (with €1.8 tn funding dedicated to recovery from the coronavirus pandemic and long-term EU priorities) is to better connect European science and technology infrastructure to industrial research and innovation in order to counter offshoring and achieve a stronger territorial embeddedness of European firms. Transcending economic nationalisms, innovation driven re-industrialisation has highlighted the role of an integrated European industrial policy, synthesising horizontal and vertical industrial policy instruments as a strategic priority. The likelihood of a Europe-wide industrial renaissance is conditioned by current trends shaping the new directions of new industrial policy, such as growing economic nationalisms and global competition for innovation, violations of European competition policy, the fragmentation of the European economic landscape along antagonistic competition vs. industrial policy interests, and the protectionist endeavors of supranational industrial circles and lobby groups. The offensive nature of new industrial policy solutions aimed at strengthening the EU's global positions facilitates exemptions from competition policy, revisiting rules on mergers and acquisitions, the policies on selecting “winners”, and joint efforts in favor of a Europeanisation of value chains and addressing the strategic dependencies of the European economy. For the industrial heartland of Europe, striking a balance between the objectives of innovative cohesion and disruptive innovation under the aegis of a pan-European industrial strategy is of crucial significance. The innovation (and more recently, coal) divide as a major barrier to unlocking growth in the European industry is manifest in the spatially variable drivers of competitiveness and strengthening dependency relations between the economic core and “nearshoring” countries. A pan-European industrial strategy conceived in a multi-level governance approach has to be mindful of the harmonisation of industrial policies promoting the catching-up of countries lagging far behind the technological frontier. The objective of the present paper is to discuss contemporary dilemmas brought to the fore by the EU’s integrated industrial policy approach against the backdrop of the recent health and humanitarian crises.

Raffaele Paci (p), Emanuela Marrocu, Federico Aresu

Ildikó Egyed

This paper investigates the role played by public capital on the production level of Italian regions by specifically accounting for the quality of institutions. Our analysis, carried out over the period 2000-2019, benefits from the use of a rich dataset on public expenditures which allows us to build the regional series of public capital stock by distinguishing among public institutions in charge of the investments and sectors of intervention. While controlling for several contextual variables (human capital, social capital, technological capital, population density), main results show that public capital has a positive and significant effect on production. Most interestingly, looking at the Mezzogiorno's regions, public capital carried out by local institutions turns out to have a lower impact than in the rest of the Italian regions. On the other hand, central bodies in the South exhibit an impact higher than the average. Moreover, institutions' quality exhibits a positive and significant effect on regional economic performance. These results cast serious doubts about the actual capacity of the local Southern administrations to effectively manage the enormous resources of the National Recovery and Resilience Plan and of the new European Union cohesion framework 2021-2027. Our results are also relevant for other European regions that, featuring structural traits similar to Southern Italian regions, are expected to face the same difficulties in managing public funding.

Guang Yang (p), Xiaodong Ji

Raffaele Paci

In the midst of COVID-19 Pandemic, China has started to implement its 14th Five-year Plan to further shift itself to an innovation based and environment friendly economy in the new era of digitalization and globalization. In this process, modern governance is both a primary goal and tool to achieve the feat.

What governance models this will entail particularly at the regional level will be key to drive China’s successful transition. China constitutes a vastly diverse set of areas with highly productive ones such as the Yangtze River Delta region as one of the country’s growth engines, and less developed areas such as the Central and West regions that need to prosper through economic transformation. Significant improvements in existing regional governance approaches and/or adopting new governance models are required to tackle issues such as lack of a shared regional vision and strategy and significant urban-rural divide.

Responding to different challenges in the new era, new regional governance models have been rising in China, ranging from informal, formal to hybrid models with increasing collaboration and partnership between not only governments but enterprises, social organizations and the common public. Regions such as the Yangtze River Delta region and the Pearl River Delta are at the forefront of the trend, experimenting with alternative governance models as a new platform to embrace their own growth opportunities and tackle local challenges. It is imperative to review what has been happening in regional governance trends and explore future directions in developing and improving region-fit modern governance models. This will ultimately propel China’s regional economy to shift to a high gear and set China’s regional growth and development on the right path.

Using a systematic approach, the paper seeks to map out existing and emerging governance models in greater detail that are designed for regions as a whole or for specific purposes, analyze comparatively the cooperative mechanisms of provinces and cities within regions, including structures, governance capacity, services they deliver, decision-making processes involved, funding mechanisms and underlying rationale as well as the effectiveness of the governance models. The discussion of these different model attributes is deeply rooted in the regional development trends in the new era, particularly China’s effort in identifying and seeking the appropriate spatial articulation of economy and corresponding intervention practices. How to improve and enhance the new governance models to best serve their purposes is also discussed.