Workplace Skills as Regional Capabilities: Relatedness, Complexity and Industrial Diversification of Regions

The literature reaches a unanimous agreement that industrial diversification is path-dependent because new industries build on preexisting capabilities of regions that are partly embodied and reflected in the skills of regions’ workforce. This paper explicitly accounts for regional capabilities as workforce skills to build skill relatedness and complexity measures, skill-spaces, for 107 Italian regions for the period 2013-2019. Data-driven techniques we use reveal that skill-spaces form two highly polarised clusters into social-cognitive and technical-physical skills. We show that industries have a higher (lower) probability of developing comparative advantage if their required skill set is (not) similar to those available in the region regardless of the skill type. We find evidence that similarity to technical-physical skills and higher complexity in social cognitive skills yields the highest probabilities of regional competitive advantage.