Beyond productivity slowdown: Quality, pricing and resource reallocation in regional competitiveness

Labour productivity change at constant prices is the mainstream indicator of regional competitiveness. However, it hides and overlooks some relevant sources of competitiveness that may partly explain the Solow paradox. First, it mixes productivity improvements from technological progress with those from relocating activities to more productive sectors. Second, it partially overlooks novelties and qualities embedded in new products and the effects of market power. This paper proposes a methodology to disentangle the different effects and to apply it to recent development of European regions. Results highlight the highly heterogeneous competitive strategies of regions, and the persistent discrepancy between Eastern and Western ones.