The costs of the economic crisis: which scenario for the European regions?

Abstract

Although the crisis is a world phenomenon, its impact is not at all spatially invariant. The aim of the article is to analyse the spatial effects of the crisis, doing so through a scenario-building exercise in which policies are kept constant, and economic growth is mainly driven by macroeconomic and supply side trends on the assumption that the crisis will end in 2015. The final goal is to raise awareness of policy makers on the costs of the present economic crisis and on their spatial impacts, so as to direct growth policies towards more targeted interventions. Our results show that the crisis produces structural breaks in local economy growth patterns; after years of convergence, regional disparities will rise due to an increase in intra-regional disparities, only partially limited by international convergence, strongly reduced in the years of crisis. The scenario is developed thanks to the MASST3 model, a regional growth forecasting model recently updated and enlarged to be able to forecast the impact of the crisis.