Does related variety affect regional resilience? New evidence from Italy

Abstract

Although several contributions have studied the effect of related variety on the economic performance of firms and regions, its influence on regional resilience—that is, regions’ capacity to adapt to external shocks—has received little attention. This paper contributes to this debate by analysing empirically the relationship between related variety and regional resilience at the local labour market (LLM) level in Italy. The analysis uses a standard definition of regional resilience and employs spatial econometric techniques to analyse the role played by related variety as a short-run shock absorber with respect to the 2008 Great Recession. The results obtained from the estimation of Spatial Durbin Error Models suggest that LLMs characterised by a higher level of related variety have shown a higher capacity to adapt to the Great Recession with respect to the 3-year period 2010–2013. On the contrary, there is evidence of a negligible role played by related variety as a shock absorber with respect to the 1-year resilience period 2012–2013.