Dr. Alicia Gómez-Tello (p), Dr María-José Murgui-García, Dr María-Teresa Sanchis-Llopis

The widening of regional disparities in income per capita and productivity has become a central concern in the European Union’s policy agenda. While economic activity and prosperity are increasingly concentrated in a limited number of highly developed territories, many regions face persistent difficulties in sustaining long-term growth. This paper examines the role of urban agglomeration economies, and their interaction with human capital, as a key mechanism underlying the persistence and amplification of regional productivity gaps. Moving beyond a purely city-level perspective, we analyze how the productivity advantages associated with agglomeration extend across broader regional systems.

The European Union provides a particularly suitable context for this analysis, given its strong commitment to economic, social, and territorial cohesion under a shared institutional framework, alongside substantial regional heterogeneity in productive structures, demographic dynamics, and growth trajectories. Building on the neoclassical growth model extended by Mankiw, Romer, and Weil, and assuming exogenous technological progress, regional economies are expected to converge toward heterogeneous steady states determined by factor accumulation and saving behavior. To allow for nonlinearities and spatial heterogeneity in this process, we employ a non-parametric estimation strategy based on Locally Linear Least Squares to estimate a conditional convergence equation for a panel of NUTS-2 European regions using data from ARDECO and EUROSTAT.

Our analysis focuses on the contribution of regional human capital to labor productivity growth, proxied by the share of employment in ICT-intensive sectors with tertiary education. The results reveal a positive and statistically significant effect of human capital, but with substantial heterogeneity across regions. We show that these heterogeneous returns are systematically related to differences in agglomeration structures. In particular, regions characterized by stronger agglomeration exhibit markedly higher elasticities of productivity growth with respect to human capital.

To capture this mechanism, we construct multidimensional agglomeration indices that incorporate not only population and employment density, but also specialization patterns and the spatial concentration of innovative activities. These indices allow us to distinguish between regions dominated by idiosyncratic agglomeration—typically large European capitals—and those benefiting from spatial agglomeration through proximity to major urban centers. Our findings indicate that the impact of human capital on productivity growth in highly agglomerated regions is approximately twice as large as in less agglomerated ones. Overall, the results suggest that agglomeration economies amplify the returns to human capital, thereby reinforcing regional productivity disparities, with important implications for cohesion-oriented regional policy.

Dr. Veselina Lyubomirova (p), Dr Elka Vasileva

Regional planning within the European Union stands at the threshold of a new programming period (2028–2034), marking the continuation of the established cycle of defining strategic priorities at European level and their subsequent translation into national frameworks. These frameworks help guide how we allocate financial resources and design policies at regional and local levels over the next seven years.
Against this background, the paper identifies and analyses several key challenges confronting regional planning in Bulgaria. First, the country enters the new programming period with a revised territorial structure of planning regions (NUTS 2), raising questions regarding institutional capacity, administrative coordination, and statistical comparability. Second, the forthcoming National Concept for Regional and Spatial Development with a horizon to 2040 is expected to be adopted in a context of prolonged political instability, following a sequence of eight parliamentary elections within a six-year period. This political volatility constitutes a significant contextual factor influencing the coherence, continuity, and strategic orientation of regional policy and planning.
The analysis further highlights political and institutional determinants that directly affect the effectiveness of regional governance, including decision-making fragmentation, shifting policy priorities, and administrative discontinuities. Drawing on accumulated experience from the implementation of regional planning instruments at national, regional, and local levels, the paper formulates conclusions regarding structural weaknesses and adaptive capacities within the Bulgarian planning system. On this basis, it outlines prospective directions and critical considerations for the 2028–2034 programming period, emphasizing the need for enhanced strategic consistency, institutional stability, and multi-level coordination. Several conclusions have been drawn.
First of all, there is still no public (societal) understanding of what regional policy is. Society rarely directs electoral energy beyond local and national interest. Bulgaria does not have an administrative tradition at the regional level and this significantly complicates the work of local authorities which have to collaborate at the regional level. Local authorities are elected in municipalities, and the governors are appointable on NUTS 3 level. There is no administrative power in the regions (NUTS 2), but only interaction and partnership, which must be supported by a national intersectoral policy. In practice, however, sectoral policies are not implemented with a territorial approach. The future of the regional approach in the development of Bulgaria depends on a qualitative change in the paradigm of planning, first of all on political and policy level.

Prof. Davide Fiaschi (p), Ph.D. Cristiano Ricci

A central question in spatial and growth economics is whether the mobility of production factors across locations constitutes a force for convergence or divergence. The neoclassical tradition predicts equalisation of factor returns and income convergence through spatial reallocation, while the new economic geography literature shows that local increasing returns and agglomeration externalities can sustain persistent spatial inequality (Fujita, Krugman, and Venables, 1999; Krugman, 1996). Most existing contributions, however, analyse the spatial dynamics of only one factor at a time — typically labour — leaving the joint behaviour of labour and capital largely unexplored (Desmet and Rossi-Hansberg, 2014).

This paper develops a continuous-space, continuous-time model in which both physical capital and labour are mobile across a set of locations arranged on a circle. Workers relocate following utility gradients — net of location-specific housing and congestion costs — while firms reallocate capital in response to spatial differentials in profit rates. Both types of agents are myopic and face convex mobility costs, giving rise to a gradient-flow structure. Local capital accumulation follows a Solow-type saving rule, and local total factor productivity depends on the density of workers, capturing agglomeration externalities consistent with the evidence in Ciccone and Hall (1996). An idiosyncratic component in workers' location preferences provides a micro-founded diffusion term in the labour dynamics (Fiaschi and Ricci, 2025).

The paper's central result is that the joint interaction of these two mobile factors can generate Turing instability: a spatially uniform equilibrium that is initially stable becomes unstable as capital accumulates, triggering the spontaneous emergence of persistent spatial clusters — dense agglomerations of labour and capital separated by depopulated areas. While Turing-type mechanisms have been studied in economic-ecological systems (Brock and Xepapadeas, 2010) and in economic-demographic models (Zincenko et al., 2021), the present paper identifies a novel route driven not by differential diffusion rates, as in the original biological formulation (Murray, 2007), but by the interplay between capital accumulation — which progressively raises the instability threshold — and agglomeration forces embedded in the production technology. Formally, a threshold $L^*(K)$, increasing in the local capital stock, separates stable from unstable uniform configurations.

Numerical simulations confirm the theoretical predictions and illustrate the two-phase dynamics: an initial convergence toward uniformity followed by a sharp divergence into Turing spots. The findings suggest that policies aimed solely at promoting labour mobility may be insufficient to counteract spatial divergence if capital accumulation continuously shifts the economy into the unstable regime.

Dr. Marta Cusa (p)

Current unsustainability, both environmental and social, at the global and national levels (Fanning and Raworth, 2025; Fanning et al., 2022) drives further exploration of the potential at the local level to address the sustainability challenge. The local development approach, by focusing on the distinctive characteristics of territories and their inhabitants, has the capacity to adapt and leverage these specificities, thereby fostering the radical changes that the challenge requires. Nevertheless, current economic models that encompass social and environmental concerns rarely integrate this level of analysis (Hardt and O’Neill, 2017; Lauer et al., 2025).
This research therefore aims to conduct a systematic literature review on the models of sustainable local development, in order to provide a comprehensive overview of the state of knowledge on the subject. Both theoretical reflections and empirical applications are considered. The focus is on models, both quantitative and qualitative, to complement the analysis of the components of sustainable local development, with the examination of the factors that underpin its attainment.
The review is designed to integrate economic contributions with those from other social sciences. In fact, the complexity and multifaceted nature of the sustainability challenge call for interdisciplinarity (Wu, 2014). Both bibliometric and content analyses are performed, with the latter focusing on the various conceptualisations of sustainable local development proposed, the methodologies employed and the factors considered, and the empirical evidence gathered.
This is the first review on sustainable local development that is centred on models and combines a systematic methodology with an interdisciplinary approach. Ultimately, this review aims to offer a useful contribution to foster the role of the local scale in more sustainable development models.