The black box of regional growth

Abstract

Regional growth models leave a large share of variation unexplained. While we should continuously aim to improve these models, the unique combination of conditions and human agency in each region will also invariably lead to region-specific growth trajectories. Theoretically, we should thus expect systematic deviations from growth predictions. We propose an approach to explore these unexplained deviations and to detect regions that perform unexpectedly well or badly in certain periods. We illustrate the approach using data for Sweden from 1990 to 2016. We find systematic patterns of unexplained periodic regional growth deviations outweighing the effect of generic structural factors.