Falling into the middle-income trap? A study on the risks for EU regions to be caught in a middle-income trap
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This Report introduces and measures the concept of the regional development trap for the case of the European Union (EU). The concept of regional development trap is deployed to identify EU regions that have lost their competitive edge and hence face significant structural challenges in retrieving past dynamism or just improving prosperity for their residents.
The Report develops a definition of regional development trap derived from the theory of the middle-income trap. This concept has, until now, been applied at a national economy level in emerging countries. It proposes measures to identify those EU regions that can be considered to be in a development trap or at significant near-term risk of falling into such a trap.
These measures are constructed by evaluating the economic, productivity, and employment performance of every region in the EU relative to itself in the immediate past, compared to other regions in the country where it is located and to other regions in the EU.
The development trap indicators generate the first detailed and dynamic picture of the phenomenon of development traps in the EU at a regional level.
The Report also uncovers the key factors that determine why regions fall into development traps and the obstacles that trapped regions face in attempting to fulfil their economic potential and escape the trap.
Finally, having a growing number of regions facing development traps generate economic, social, and political risks for individual regions and the EU as a whole. The report highlights these risks.