Institutions and the fortunes of territories

Resumen

Regions and cities face unceasing pressures to adapt in response to processes of globalization, changes in industrial production, and new patterns of migration and trade. At the same time, the dominant development policies are proving less than capable of providing answers to these challenges. Strategies based on a mix of physical and human capital and technology have not succeeded in dealing with growing territorial inequality and its treacherous economic, social and political consequences. There is thus an urgent need to understand why territorial divergence occurs and why there is what seems to be a growing decline in the returns of public intervention targeting economic development. In the search for answers, scholars have turned to the examination of institutions. But despite progress in our grasp of how institutions affect development, crucial knowledge gaps remain. This paper reviews recent progress in our understanding of the role of institutions for development, unveils the most important gaps, and proposes a series of avenues to improve how a better understanding of how institutions shape regional and urban development can lead to more efficient development policies. Las regiones y las ciudades se enfrentan a presiones continuas de adaptación en respuesta a los procesos de globalización, cambios en la producción industrial y las nuevas pautas de migración y comercio. Al mismo tiempo, las políticas de desarrollo dominantes están demostrando ser menos capaces de dar respuestas a estos desafíos. Las estrategias basadas en una mezcla de capital físico y humano y tecnología no han logrado hacer frente a la creciente desigualdad territorial y sus peligrosas consecuencias económicas, sociales y políticas. Por consiguiente, es urgente comprender por qué se producen divergencias territoriales y por qué se produce lo que parece ser una disminución creciente de los beneficios de la intervención pública orientada al desarrollo económico. En la búsqueda de respuestas, la investigación ha recurrido al examen de las instituciones. Pero a pesar de los avances en la comprensión de cómo las instituciones afectan al desarrollo, siguen existiendo lagunas de conocimiento cruciales. En este artículo se examinan los progresos recientes en nuestra comprensión de la función de las instituciones para el desarrollo, se revelan las lagunas más importantes y se propone una serie de vías para mejorar la forma en que una mejor comprensión de la manera en que las instituciones configuran el desarrollo regional y urbano puede conducir a políticas de desarrollo más eficientes. 地域や都市は、グローバル化の過程、工業生産の変化、移住や商取引の新しいパターンに対応して適応させられる圧力に絶え間なく直面している。それと同時に、支配的開発政策は、これらの課題に対処する能力がないことが明らかになってきている。物理的資本と人的資本と技術の組み合わせを基にした戦略では、拡大する地域格差と、その危険性を孕む経済的、社会的、政治的影響には対処することができない。そのため、なぜ地域格差が生じているのか、なぜ経済発展を目的とした公的介入のリターンが減少しているようにみられるのかを解明することが急務である。答えを探すために、研究者たちは機関を調査することを始めた。しかし、制度が開発にどのように影響するか理解が進んでいるにもかかわらず、知識の大きなギャップが今なお存在している。本稿では、開発のための機関の役割に関する我々の理解の最近の進展を概観し、最も大きなギャップを明らかする。そして、機関が地域/都市開発をどのように形成しているかをよりよく理解することが、より効率的な開発政策につながる方法を改善するための一連の方法を提案する。 Regions and cities have been receiving ever-greater attention as the locus of socio-economic research and, increasingly, as the focus of development practice. Facing unceasing pressures to adapt and change in response to new and uncertain circumstances—including the onset of strong globalization forces, the spatial re-shifting of industrial production, and new patterns of international migration and trade—territories the world over, as well as the countries and supranational organizations they belong to, have sought to set up development strategies to restructure their economic bases in order to remain both competitive and sustainable. Most development strategies have been firmly anchored in traditional economic growth theory. According to the dominant theories in economics, economic growth and changes in employment and productivity are the result of a combination of three factors: physical capital, human capital or labour, and innovation. In addition, there is a residual factor or error term, which represents the part behind economic performance that we do not know or cannot explain using the traditional components of physical capital, human capital and innovation. Depending on the chosen approach to economic performance, the weight attributed to each of the components varies. The neoclassical growth strand (Solow, 1956; Swan, 1956) put the emphasis on physical capital. The endogenous growth approach (Romer, 1986: Lucas, 1988) focused on human capital and innovation. In turn, the new economic geography (Fujita, Krugman, & Venables, 1999; Krugman, 1991, 2011) and urban economics (Glaeser, 2011) stressed the role of agglomeration economies, externalities and density. These three factors—plus agglomeration and density—continue to be the fundamental elements informing theoretical and empirical thinking about economic development policies and, consequently, development strategies across the world often remain anchored in these theoretical frameworks. The European Union's (EU) Cohesion policy—the largest development policy in the world—has been no exception. The bulk of cohesion investments have been channelled towards improving infrastructure endowment and accessibility, as well as increasing the availability and quality of human resources, and developing the innovative capacity of individuals and firms across the less developed areas of Europe. The impact of this type of intervention has been, however, controversial. For some (e.g., Becker, Egger, & von Ehrlich, 2010, 2018; Cappelen, Castellacci, Fagerberg, & Verspagen, 2003; Cerqua & Pellegrini, 2018; Crescenzi & Giua, 2020; Ferrara, McCann, Pellegrini, Stelder, & Terribile, 2017; ; Pellegrini, Terribile, Tarola, Muccigrosso, & Busillo, 2013), European-wide investment focusing on these three areas of intervention has delivered greater prosperity to those regions that have benefited the most from the policy. For others, in contrast, the returns of European investment on cohesion have been below expectations (Boldrin & Canova, 2001; Dall'erba & Le Gallo, 2008; Mohl & Hagen, 2010) and often conditional on the type of intervention and the characteristics of the receiving region (e.g., Dall'erba & Le Gallo, 2007, 2008; Ederveen, Groot, & Nahuis, 2006; Falk & Sinabell, 2008; Mohl & Hagen, 2010). The stark reality is that while some regions and cities have thrived—frequently becoming highly networked, technology-intensive and creative—some have endured far bumpier rides, while others have fared much worse and are, in some extreme cases, grappling with strong decline. The presence of highly dynamic winning cities and regions alongside areas that have seen long-term economic decay and are increasingly regarded as places with scarce economic opportunities is creating a “geography of discontent” (Dijkstra, Poelman, & Rodríguez-Pose, 2019; Los, McCann, Springford, & Thissen, 2017; McCann, 2020; Rodríguez-Pose, 2018). This “geography of discontent” is currently having significant economic, social and political implications. As indicated by The Economist on 17 December 2016, rising subnational inequality “is proving too politically dangerous to ignore.” Hence, understanding why these divergences occur is one of the principal dilemmas confronting the social sciences today: why do seemingly identical or very similar regions and cities sometimes perform so differently? Or, put in another way, what are the key factors that affect the economic fortunes of territories? This paper will look at why our theoretical toolbox is increasingly failing when trying to explain the economic trajectories of regions and cities and how a greater focus on how institutions, governance and government quality shape economic activity may not only allow us to explain better the in the economic of the for a and more efficient development policy at subnational In order to do will look at the why are we to the economic trajectories of cities and will what to be a of gaps in our to the of institutions as a to the The of the paper will in order to improve both our understanding of what economic development as well as the and of development policies. 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