European regions’ trade criticality

09 November 2022

Siyu Huang & Pantelis Koutroumpis

View Journal Article / Working Paper

We quantify the criticality of European NUTS2 regions by estimating the industry-region trade flows for the period 2008-2018. To achieve this we construct Multi-Regional Input-Output (MRIO) tables for all EU countries building on freight transport data as their main trade route across them. Within each industry we identify the key exporting regions responsible for intra-EU trade. We further explore the effects of a supply-chain shock affecting each industry-region and its repercussions on trade flows. In 53% of the regions these shocks are contained within the region itself, for 9% within the focal country and for 38% the shock spreads to other countries. These effects are asymmetric across sectors and countries: almost 60% of the region specific shocks in Mining, Manufacturing, Energy and Water transmission (B-E NACE codes) will propagate across borders whereas only 8% of public, health and education services (O-Q NACE codes) will reach foreign countries. We also compare our results to existing national and regional trade flow data to verify the statistical power of our model. Our results provide a policy-making tool for the dynamic role of regional trade criticality and can help mitigate existing vulnerabilities and improve EU trade resilience.