With economic growth being driven more and more by cities and regions rather than countries, regional competitiveness has become a top priority for governments around the world. One of the key ways that regional authorities can boost competitiveness is through strategic investments aimed at lifting gross value added (GVA). By targeting investments into sectors and technologies aligned with local strengths and growth opportunities, regions can create an environment that supports business growth, skills development, innovation and infrastructure modernization. This in turn raises productivity, incomes and living standards. However, not all investments are equal in their impact. To maximize returns, regional investment plans need to be guided by rigorous analysis of regional economic data, especially metrics like GVA. Used properly, GVA-based analysis provides vital insights that allow authorities to identify strategic investment priorities that will give them the most bang for their buck in lifting regional competitiveness.
Use GVA analysis to identify growth opportunities and constraints
Gross value added (GVA) measures the value of goods and services produced in an area, industry or sector of an economy. It provides a snapshot of where economic activity and growth is being generated in a region. By analyzing trends in regional GVA over time and comparing GVA by industry, authorities can identify high-growth sectors as well as lagging sectors. This points to potential growth opportunities and constraints. For example, analysis may reveal that growth is disproportionately coming from a handful of industries, indicating the need for economic diversification. Or it may show that manufacturing GVA has declined steadily, underscoring the need for revitalization efforts. GVA benchmarking against other regions also helps authorities understand their competitiveness in attracting investment and talent.
Funnel investments into sectors with high GVA multiplier effects
Not all sectors generate the same bang for buck when it comes to GVA growth. Some industries have large multiplier effects – they stimulate increased economic activity and jobs throughout their supply chains and surrounding communities. For instance, investments to expand advanced manufacturing capabilities have been shown to create two to three times more additional jobs and GVA growth in supplier industries compared to traditional manufacturing. Similarly, infrastructure investments like highways, airports and utilities generate significant positive spillover effects on regional development. By mapping GVA multipliers, authorities can determine which sectors will give them the most competitive advantage for their investment dollars.
Combine GVA analysis with human capital and innovation metrics
To maximize competitiveness, authorities need to view GVA growth in the context of broader human capital and innovation goals. GVA growth is stronger when the regional workforce is equipped with skills aligned to target industries. And investments have longer term payoffs when they also strengthen a region’s innovation ecosystem by spurring research, entrepreneurship and technology absorption. Forward-looking authorities are combining GVA analysis with metrics on regional skills profiles, patent activity, venture capital availability and technology transfer to create a comprehensive picture of regional competitiveness. This allows them to make integrated investment decisions that support both near term GVA growth and long term prosperity.
Implement robust monitoring and evaluation frameworks
To ensure investments deliver on their promise, authorities need strong monitoring and evaluation (M&E) frameworks. Well-designed M&E tracks progress against clear targets and benchmarks. This allows authorities to identify any problems early and make course corrections. M&E should also require rigorous impact evaluations – using methodologies like randomized control trials – to conclusively demonstrate how investments are impacting key indicators like GVA. Building a culture of evidence-based policy making is critical to maximizing the return on investment and lifting regional competitiveness over the long term.
GVA provides a vital metric that allows authorities to diagnose strengths, weaknesses and opportunities in regional economies. By undertaking rigorous GVA analysis and using these insights to guide strategic investments, authorities can spur innovation-led growth that creates high quality jobs and boosts standards of living. To maximize competitiveness impacts, GVA needs to be assessed in tandem with human capital and innovation indicators, and investments require robust M&E frameworks. Used effectively in this way, GVA becomes a pivotal tool for shaping regional competitiveness.