Thread by @JohnSpringford

.@COdendahl and I have a new paper out on regional economic performance in the EU today. It includes an interactive map of regional productivity across the EU. cer.eu/publications/a…

The map shows big differences in regional productivity performance, especially in Germany, Italy and the UK. Compare the city of Manchester with Greater Manchester northwest. The city has a productivity level around that of Denmark. The north-western suburbs, Cyprus.

Why? The paper explains what has happened to regional economies in Europe over time. The big story is the decline of industry and the rise of services.

This chart shows the regions that lost most industrial output, 1980-1995 (red bar). Paris substituted industry for more services output (green bar). It already had a very large services sector (blue bar).

The region that lost the second most industrial output, the Dutch city of Groningen, used to be a centre for sugar production. It struggled to replace that with higher services output.

Manufacturing is much more 'spreadable' across space than services. Industrial output grew much faster in the countryside than in cities in Western Europe from 1980. Capital searched for cheaper land and labour costs.

Business services - broadly, the highest-value services sector - showed the opposite pattern, concentrating in capitals. Here, the benefit of clustering, to have access to skilled labour in cities outweighed the benefit of cheaper land and labour.

Services companies are becoming increasingly profitable compared to manufacturing (this analysis is thanks to Bloomberg @economics). And research-intensive services/tech firms are the most profitable. They are increasingly concentrated in Europe's successful cities.

Our regression shows that, if a region has a larger graduate population, it is more productive. That link is increasing over time. The same goes for a younger population - an older population means lower productivity, and that link is also increasing.

And the graduates are increasingly concentrated in successful cities - often capitals. We are seeing high-value, highly-profitable services firms and graduates increasingly concentrated in the most successful regions.

A headache for policy-makers. Raising services productivity means creating successful city 'hubs', because graduates, high-value services and tech firms tend to cluster together. But what to do about places, often post-industrial regions, that struggle to attract them?

This is the first paper in our 'Growing together' project. We will speculate about future trends in globalisation and technology to think about what that means for convergence between the regions and countries of Europe.

And we'll come up with some policies to try to kick-start convergence across Europe. Regional under-performance is one cause of Europe's political problems.

Sorry for the long thread - thanks for reading if you got this far. Do read the paper and play with the map!