Crisis Management or Crisis Preparedness? The Importance of Economic Diversification in Building Resilience to Economic Crises

Abstract

. Economic crises periodically disrupt the economic activity, severely putting to test the resilience capacity, and the ability to overcome hardships by adapting and changing. This happens everywhere, from micro (firm) level to macro (country/region) level alike. A large and continuously growing literature was dedicated to understanding the reasons behind the crises, their mechanism, effects and, most of all, the solutions. What if the answer lies not in solving the crisis after it started but in preventing, or at least preparing in advance for economic shocks by building resilience during good times, so that the impact of economic crises can be attenuated? Starting from these considerations, the paper focuses on regional economic specialization and its opposite – economic diversification, two business strategies already acknowledged in the literature as relevant factors for the capacity to mitigate economic crises. We tested the hypothesis of resilience-inducing economic diversification in the Romanian economy, using NUTS3 level data and found that more diversified regional economies were better at coping with the hardships triggered by the recent recession.