Merging macroeconomic and territorial determinants of regional growth: the MASST4 model

Abstract

While prior econometric forecasting models focus on either macroeconomic or territorial aspects as drivers of regional growth, the fourth version of the MAcroeconomic, Sectoral, Social, Territorial (MASST4) model merges these two conceptual approaches to regional growth. Mechanisms of territorial complexity governing regional development theories, like agglomeration economies, or structural changes in innovation modes, are included into a formal model so that they simultaneously activate regional growth and mediate macroeconomic growth impacts. Moreover, a longer time series than in previous versions of the MASST model now allows to take account of the structural changes taking place in EU economies as a consequence of the recent crisis. The model now also models the effects of the decrease in EU integration stemming from populistic waves in politics taking place in EU countries. The paper also presents an application of the MASST model to a reference scenario.