Digital breach across European Union territories and economic development: an analysis based on a novel digital index

Purpose This study examines the progress of digitalization across EU NUTS-2 regions from 2017 to 2021 and introduces the NUTS-2 Digital Index (N2DI), a composite indicator that measures regional digital capacity and its correlation with economic performance. Design/methodology/approach The N2DI is constructed from four key dimensions: human capital, connectivity, digital technology integration and digital public services. Using principal component analysis, clustering techniques and panel data models, the study assesses regional disparities, digitalization trends and the relationship among N2DI, GDP per capita and digital budget allocations. Findings The findings reveal ongoing digital divides between North-Western and South-Eastern regions, with medium-performing regions demonstrating the most significant improvements. The study indicates a positive association between digitalization and GDP per capita; however, patterns of budget absorption expose some structural inefficiencies. While digitalization contributes to regional development, its effects vary across different clusters. Originality/value This study presents the first multidimensional digitalization index at the NUTS-2 level and offers a robust analytical framework for understanding regional digital transformation within the context of EU policy.