Rethinking regional performance: examining the role of economic growth and industrial clusters in the objective well-being of European regions

Abstract While promoting the well-being of people is the ultimate goal of all EU social and economic policies, research in this area has been mainly limited to income-based measures of well-being, such as GDP per capita, especially at the regional level. Therefore, this study aims to go beyond income-based measures and examine the spatial distribution and drivers of objective well-being in European regions. To achieve this, a unique panel dataset is created by integrating regional data on objective well-being (based on the EU-Social Progress Index), economic growth, industrial clusters and knowledge structure, covering 165 NUTS-2 regions from 11 EU countries (between 2011 and 2018). Based on dynamic panel regressions using a system generalized method of moments (GMM) approach, it is shown that the economic growth promotes the objective well-being in regions. Evidence is also found that the industrial structure within regions is an additional driver. Regions with a diverse industrial cluster portfolio are more likely to have high objective well-being. However, this influence is negatively moderated by the strength of the industrial clusters, which possibly refers to size-related negative externalities. Besides the economic effects, industrial cluster structures can therefore also influence the objective well-being in regions. To promote regional well-being, regional policies should support a diverse industrial cluster portfolio rather than a regional cluster structure that is overly specialized in relatively few large industries.