On the Concept of Territorial Competitiveness: Sound or Misleading?

Abstract

In a globalising economy, territories and not just firms increasingly find themselves in competition with each other. In fact, unlike countries, cities and regions compete, in single currency areas, on the basis of an absolute advantage principle and not a comparative advantage principle. This means that no efficient, automatic mechanism—like currency devaluation or prompt flexibility of wages and prices—exists to grant each territory some role in the international division of labour, whatever its relative performance. The competitiveness of territories thus emerges as a central issue, in order to secure employment stability, benefits from external integration, continuing growth of local well-being and wealth. The arguments put forward by Paul Krugman, defining the concept of competitiveness, are wrong and misleading, and cannot be accepted in a territorial—regional and urban-context.