How ‘Provincial is Your Region? Openness and Regional Performance in Europe

By employing 1995-2000 data on European regions we construct an index of regional openness based on the share of hotels on population and the share of population that speaks a second language. This index has an impact on regional performance after controlling for technological capabilities, agglomeration economies, and other factors. Apart from a direct effect of openness, we find an indirect effect coming through patents. This suggests that open regions tap into wider knowledge networks that then affect performance. From a policy perspective, making a region less provincial can be as important as investments in local infrastructures and networks.