Unveiling the relationship between regional economic resilience and input-output network topology: Evidence from the European Union

Abstract

This paper empirically explores the propagation mechanisms through which exogenous shocks are diffused and amplified throughout the input-output network structure of regional economies in the European Union. To do so, it develops weighted and directed input-output network models across the European Union (EU) NUTS-2 regions and computes measures of network typology capturing connectivity, centrality, and clustering. Network analysis facilitates a clustering of the EU countries into groups of common topological features, favoring a mix of tailored policies per each group. Spatial regression analysis reveals that the intensity of the sectors’ clustering is positively associated with regional resilience, while the sectorial clustering of regions negatively affects their resilience to exogenous shocks, revealing a competitive relationship between network topology and functionality in the configuration of regional resilience. The overall approach provides a methodological framework for an instrumented policy making and empirically highlights the importance of innovation and knowledge-based policies for enhancing regional economic resilience.