The notion of competitiveness is widely used in economics and in regional sciences. Policymakers are also embracing and employing the concept of competitiveness as a principal objective of policies. There is general agreement that the definition of the competitiveness which matters in today’s economy is no longer a static concept, but rather an intrinsically dynamic one which stems from the renewal of advantage over time in order to maintain it through various types of innovation. Despite this, the dynamics of regional competitiveness are still relatively unexplored. There is insufficient awareness of how those factors associated with competitiveness are normally different not only in their essential characteristics, but also in how they deploy their effects over time. This implies that the study of regional competitiveness would benefit from a deeper understanding of how the regional economy works and the manner in which what happens in a node of the regional economy deploys its effects through second- and third-order impacts, often recursively, before its full impact can be detected. This is especially important for the policymakers expecting to achieve an outcome after a policy initiative, who are rarely aware of the time impact of policies. To show how the dynamics of regional competitiveness can be modelled using an intrinsically dynamic methodology, this chapter uses the one of the dynamic systems. In order to examine the evidence for the dynamic approach, example simulations are used to show how policies can achieve different impacts depending on the context in which they are applied. Conclusions for the use of this approach are then considered.
The treaties of the European Union (EU) state that the EU ‘shall promote economic, social and territorial cohesion, and solidarity among Member States’, which implies that ‘the Union shall aim at reducing disparities between the levels of development of the various regions and the backwardness of the least favoured regions’. This is implemented with different objectives along programming periods, each seven years in length. Overall, the Structural Funds and the Cohesion Fund represent approximately one-third of the European Union’s budget. This is the most closely scrutinised policy at regional level, due to relatively good data availability and its existence in similar forms since at least 1989, which allows for long-run analyses. A large number of academic papers have been published in the last 15 years aiming to assess its economic impact, but there is still no consensus on whether and to what extent the policy has really been effective. This is due to theoretical and empirical issues arising when trying to empirically assess this policy. For this reason, this chapter analyses the many issues which can arise with the appraisal of the impact of Cohesion policy, which presents a large number of difficulties, some of which are standard to policy assessment, while others are due to the specific characteristics of Cohesion policy. Each issue is discussed theoretically and the way in which the literature confronts it is presented. Too often some issues are either neglected or, due to the difficulties in addressing them, relinquished. Among the discussed relevant issues are: on which variables the impact should be assessed, after how long, at what geographical scale, which disturbance factors are relevant, whether the impact should be confined to the region receiving funds, the interaction with other policies, how the impact changed in time, the possible existence of threshold effects, the overlapping of programming periods, the differentiated impact by regional characteristics, the changes in objectives in time, and the interplay between eligibility, growth and political support. The chapter concludes by noting that it is not very interesting, either theoretically or from a policy point of view, to observe that there has been some effectiveness of Cohesion policy, and that it is hence time also for econometric researchers to analyse how to improve effectiveness, which can be done by investigating not whether Cohesion policy has been effective, but when, where and how it has been so.