Constructing a Novel Competitiveness Index for European Regions

Space has only recently become a terrain of strenuous economic research. With the New Economic Geography (NEG) integrating into mainstream, many spatial subjects, including territorial, or regional, competitiveness are being increasingly inquired. In line with Krugman (2003), we argue that it is plausible to discuss competitiveness on a regional level, as a capacity of territories to attract and retain mobile factors of production, which is an increasingly important subject in an ever integrating global economy. However, this branch of economic geography is relatively underdeveloped, while it even lacks a universally accepted definition and metrics. In order to overcome this shortcoming, we propose a novel definition, along with a new index on territorial competitiveness tailored for the case of European regions at NUTS 2 level. This paper is structured as follows. In the first part, we provide a short discussion on theoretical background of the study on regional competitiveness and present in brief the key notions used in the literature. It is in that part where we propose and interpret our definition of regional competitiveness. Next, we discuss on ways of quantifying regional competitiveness and on some of the key attempts taken so far. In the third part, we present our index for European regions, by describing the territorial, temporal and methodological choices, theoretical justifications, as well results and their interpretation in the light of the NEG. The fourth part concludes and the fifth contains annexes.