What Determines Relative Sectoral Investment Patterns in EU Regions?

This study analyses relative sectoral investment patterns in EU regions. In an exploratory spatial data analysis, spatial clusters of high relative investments can be identified for some sectors. In the econometric analysis, we control for heteroscedasticity and potential endogeneity and find that investments in manufacturing sectors are attracted by central regions, investments in services sectors, instead, by administrative centres as well as regions far away from their national administrative centre. A higher local level of sectoral economies of scale and of productivity strongly increases investments in manufacturing sectors. Labour cost differentials, however, are insignificant in explaining the location of relative sectoral investments.