Strengths and weaknesses of EU regional reactivity to shocks

This study introduces the novel concept of regional reactivity to shocks. A region is considered to be much more reactive if it bounced back to the level of labour productivity achieved before a shock in the same or less time than it took to reach the pre-2008 economic crisis peak from an equivalent lower bound. The analysis of the reactivity of the EU-NUTS2 regions reveals a clear spatial pattern. By using a spatial lag model selected via a Bayesian comparison approach, we show that tertiary education and institutional quality are key to promote reactivity. On the other hand, population density acts in the opposite direction. Our results are potentially useful for defining policy strategies that emphasise or refocus the strengths of each region in light of current territorial trends and emerging challenges.