Institutional quality, structural change and regional development in the EU

This study examines the drivers of regional economic development in the European Union over the period 2000–2021. We focus on conventional determinants, various sectoral covariates and the role of local institutions. Controlling for spatial spillover effects and potential endogeneity, we confirm that investment, human capital and specialisation in service activities are key drivers of regional development. In addition, the quality of government (QoG) is a significant predictor of regional development. In line with theoretical arguments, impartiality has a higher impact on economic growth than the quality of public services and control of corruption.