Resilience in Europe: a multidimensional analysis

Departing from common practice using income and employment, we investigate the resilience of European countries on the occasion of the Great Recessions in terms of multidimensional well-being. Preliminary at the country level, with the aim to implement the analysis at the regional level in a second step. The potential effects of fiscal federalism on the ability to recover from the economic shock at the sectoral level are taken into account using data from the IMF’s Fiscal Decentralization dataset and Regional Authority Index (RAI). Methodologically, the empirical analysis adopts a pooled regression approach with Driscroll-Kraay standard errors to consider very general forms of cross-sectional/spatial and temporal dependence. The analysis shows that (i) the results in terms of multidimensional resilience along the so-called 4Rs (i.e. Resilience, Recovery, Reorientation, and Renewal) are rather sector-specific and, (ii) generally speaking, the level of fiscal decentralization mitigates the shocks. These results shed some light on the sectors most affected in occasions of economic shocks and suggest potential interesting policy implications in times of crisis.