The Determinants of Economic Resilience. The Case of Eastern European Regions

TLDR

The 2008 financial crisis hit European countries unevenly, prompting economists to revisit economic resilience and its determinants, though existing studies have notable limitations. This study examines the economic resilience of regions in seven Eastern European countries and identifies their main determinant factors. We employ a quantile regression econometric approach to analyze regional resilience. The analysis shows that Bulgaria and Slovenia exhibit the strongest resistance, while Croatia, Czech Republic, Hungary, Romania, and Slovakia decline; recovery is strongest in Bulgaria, Romania, and Slovakia, with resilience driven by manufacturing, services, public administration, entrepreneurship, and tertiary education, whereas agriculture and urban population are insignificant, leading to policy proposals.

Abstract

The economic crisis of 2008 strongly affected European countries, many of them slipping into a recession whose depth and manifestation differed substantially from country to country and from region to region. In this context, economists revived the concept of economic resilience of states and regions and focused on identifying and explaining its determinants. The literature investigates ways to enhance economic resilience through appropriate public policies, but the studies conducted so far have several limitations. In order to contribute to this goal, this article analyzes the economic resilience of the regions of seven Eastern European countries (Bulgaria, Hungary, Croatia, Czech Republic, Romania, Slovakia and Slovenia) and its main determinant factors. The results show that, in terms of resistance, Bulgaria, Slovenia and their regions behaved best, while Croatia, Czech Republic, Hungary, Romania and Slovakia (including regions) had a negative evolution. In terms of recovery Bulgaria (and 4 regions out of 6), Romania (5 out of 8 regions) and Slovakia (4 of 4 regions) performed better than the other Eastern countries. The determining factors of resilience for the studied regions concern the size of the manufacturing sector, the services and public administration, entrepreneurship and the human capital represented by tertiary education; agriculture and urban population have no significant influence on regional resilience. We adopt an econometric approach in this study, using the quantile regression for the analysis. Based on these empirical evidences, appropriate proposals have been formulated, useful to both field theorists and practitioners in public policy.