Niklas Elert (p), Anders Bornhäll, Hans Seerar Westerberg

Katarzyna Kopczewska

To assess regional resilience against economic shocks, we examine how big bankruptcies, closures, and lay-offs (big exits) of local firms and plants affect regions, municipalities, and local industry sectors in Sweden. Big exits are severe enough that we may treat them as economic shocks but also frequent and similar enough to enable systematic comparisons. Studying the local response to big exits thus offers a straightforward way to assess the resilience of local economic systems.
A rich panel dataset with detailed information on Swedish firms and employees and a host of relevant municipal and regional statistics spanning 20 years makes it possible for us to examine the impact of big exits along several dimensions at the municipal, regional, and local sectoral levels. For identification purposes, we employ a Difference-in-Difference framework where we match “treated” municipalities, local sectors, and regions with comparable, “untreated” units to be able to consider estimated effects from big exits as causal. Among the indicators that we use to assess resilience in the short and long term are:
- The performance of incumbent firms in terms of revenues, employment, etc.
- Entry and exit rates, and structural transformation variables, e.g., how the share of employment and output changes over time.
- Municipal outcomes, e.g., employment, incomes, and growth.
It is also plausible that the impact of a big exit differs depending on characteristics tied to resilience. For example, local systems characterized by more entrepreneurship, innovation, and human capital intensity may experience less severe, or even positive, impacts of big exits, at least in the long term. We therefore subdivide the data along such dimensions to assess and identify which factors are of particular relevance to resilience against economic shocks.
Preliminary results reveal that resilience seems greater in sectors and municipalities characterized by greater entrepreneurship, human capital, and industry diversity prior to the shock, in the sense that they “bounce back” quicker. Different output variables also reveal different patterns: Notably, following a big exit, affected industries initially suffer in terms of e.g., output and new firm formation, but return to – or even surpass – pre-shock levels in the scope of a few years. Overall employment and income at the municipal level also bounce back relatively quickly, seeing considerable restructuring. In contrast, laid-off individuals with low levels of human capital see prolonged unemployment spells.

Iulia Siedschlag (p), Weijie Yan, Nigel Driffield

Niklas Elert

This research paper examines factors and policies underlying the attractiveness of EU regions to foreign direct investment (FDI) in high-value knowledge-intensive sectors such as aerospace, pharmaceuticals, information and communication technologies and software. Understanding what drives the location choice of FDI in high-value sectors is important for designing policies aimed at enhancing the competitiveness, innovation and productivity of EU regions. We analyse the location choice of 33,482 new greenfield FDI projects in high-value sectors across EU regions over the period 2003–2020. The analysis uses a newly generated dataset combining information on new greenfield FDI projects across EU regions and countries over the past two decades (sourced from the Financial Times fDi Markets database) with data on location-specific factors that influence the location choices of FDI projects (sourced from the European Commission, Eurostat and OECD). To identify and quantify the importance of location-specific factors that influence the location choice of new FDI projects, we use a Poisson model with fixed effects. The main findings indicate that the attractiveness of a given location to high-value FDI is positively associated with EU market potential, market growth, the participation rate of the working age population in education and training programmes, workforce skills, the presence of agglomeration economies, R&D expenditure in the public sector, government funding of business expenditure on research and development and broadband access. While the educational attainment of the working age population and R&D expenditure in the public sectors enhance the attractiveness of a given region to FDI in services, these factors are not as important for FDI in manufacturing. Finally, our results indicate that investors from the EU value location factors differently to investors from non-EU countries. While the participation rate of the working age population in education and training and broadband access are associated with enhanced attractiveness to FDI in high-value sectors by non-EU investors, these location-specific factors do not affect the attractiveness of a given location by EU investors over and above other determinants of FDI.

David Castells-quintana (p), Roberto Gasquez

Iulia Siedschlag

The connection between sports and development has been long highlighted in acadamia and policy debates. But the extent to what the success of professional sport teams can spur economic dynamism has hardly been studied in the literature. In this paper, we look at the potential connection between sporting success and economic development. We focus on club football performance and economic dynamism in European regions. To do so, we build a unique dataset with information for 395 football clubs, matched with economic information for 295 NUTS3 European regions, for the 2000-2020 period.

Katarzyna Kopczewska (p), Maria Kubara, Mateusz Kopyt

David Castells-quintana

Research on business location has traditionally focused on knowledge transfer and the most productive and innovative firms, typically relying on agglomeration mechanisms like matching, learning, and sharing. However, we argue that complementing these mechanisms with attracting – a process resulting from population density that generates economies of density – is necessary to fully understand the theory of business location. Our study explores the existence of the hierarchical causal mechanism that occurs when 2nd line firms (non-innovative, less-productive retail and service businesses) and human settlement create an environment that attracts 1st line firms (the most innovative and productive businesses). Using an urban and peripheral context, we demonstrate that population density and business agglomeration jointly impact firms' placement in various sectors. Specifically, we reveal the functionally and spatially hierarchical impact of density and agglomeration externalities on business location decisions, where peripherality, local specialization, diversity, competition, and urbanization externalities play significant roles. We also confirm the existence of the strong mediation effect of agglomeration in the attraction mechanism (95%), and find that overall agglomeration elasticity with respect to population density is 0.76, increasing to 1.2 in the suburbs of large cities.