a 9.5% average yearly GDP per capita growth rate over the period 2003-2017, respectively – and also includes the provinces of Pernik, Blagoevgrad, and Kyustendil – that recorded growth rates of 7%, 6.7%, and 4.7%, respectively. Such a pattern does not characterize only Mediterranean and Eastern countries – i.e. those generally lagging behind in the EU – but also ‘top’ performing Member States, such as Germany. As an example, the German region of Oberfranken shows a 4.9% difference in the average yearly GDP per capita growth rate over the period 2003-2017 between its NUTS-3 region that has grown the most, namely Coburg (6.7%), and the one that has grown the least, namely Hof (1.8%).<sup>5</sup> Furthermore, in five EU Member States, namely, Cyprus, Estonia, Luxembourg, Latvia, and Malta, one NUTS-2 region covers the whole country. Overall, this substantial variation in economic performance within NUTS-2 regions makes it hard to configure sub-national policies and investments.

**Accordingly, a growing emphasis is being put on development initiatives at a smaller scale, at NUTS-3 or similar levels.** NUTS-3 regions usually have populations of 100,000 to 800,000. In the 2014-2020 and 2021-2027 programming periods, there is a growing use of Integrated Territorial Investments (ITIs) and other instruments of ‘sustainable urban development’ (SUD). Of the ERDF, 5% should be allocated to SUD in the 2014-2020 programming period, and this will rise to 6% for the 2021-2027 programming period.<sup>6</sup> ITIs combine resources for an integrated program of initiatives at the scale of a group of towns, a county, or one medium-sized city and its hinterland.<sup>7</sup> Currently there are fully 329 ITIs in 17 EU Member States, and a further 55 SUD initiatives at the city level include economic development aspects.<sup>8</sup>

**Despite increased attention to the NUTS-3 level, there is scarce empirical evidence to inform the choice of investments and actions by local leaders, especially in lagging regions.** There is a growing body of evidence on sub-national competitiveness at NUTS-2 and similar levels globally (e.g. OECD, 2012; World Bank, 2015). Yet these studies have not usually examined heterogeneity of growth dynamics in different types of regions. What works in leading and fastgrowing regions may not work in lagging and slow-growing ones. The need for guidance may be strongest among lagging NUTS-3 regions, which are usually suffering from economic underperformance, unemployment, and emigration, and cannot find many examples of success among their peers. There are some notable examples of economic analysis at the NUTS-3 level (e.g. Geppert and Stephan, 2008; Becker et al., 2012; Panzera and Postiglione, 2014; Percoco, 2017; Butkus et al., 2018), to which this paper aims to contribute.

**Research and evaluations must become more oriented towards the pragmatic dilemmas with which local leaders struggle, if they are to be useful.** The European Commission’s evaluations of EU Cohesion Policy funds have generally focused on whether funding per se has had an impact, rather than on which interventions have been effective (Davies, 2017). A European Commission (2017) review of competitiveness in low-income and low-growth regions is one exception to this trend; it provides guidance on potential solutions to the typical problems of lagging regions, namely access to finance; low productivity and educational attainment; weak innovation systems and institutional quality; high emigration; and low public and private investment.<sup>9</sup> However, it does not yet bring evidence on whether lagging regions have realistically addressed these constraints, and if doing so has led to growth. Evaluations of typical interventions (e.g. access to finance,

> 5 Author’s elaboration on Eurostat data.

> 6 The total budget for ERDF during the period 2021-2027 is estimated at €201 billion, and Cohesion Policy funds will be €331 billion – a smaller total budget owing to the departure of the United Kingdom. For details, see the report “Regional Development and Cohesion Policy beyond 2020: The new framework at a glance”, available at “https://ec.europa.eu/regional_policy/en/2021_2027/”.

> 7 Other instruments such as Community-Led Local Development (CLLD) may also be used. CLLDs tend to focus on a smaller scale than ITIs, and are implemented by a Local Action Group (LAG) which may be constituted by several smaller municipalities. For a review of ITIs and CLLDs, see van der Zwet et al. (2014).

> 8 Data from Joint Research Council STRAT-Board, accessed on May 26, 2020 and available at “https://urban.jrc.ec.europa.eu/stratboard/”. Some examples are the integrated plans for Larnaca, Limassol, Paphos, and other cities in Cyprus; city strategies for Aalborg, Odense, and other Danish cities; and city contracts in France for Coeur de France town, Vierzon, Amboise, and others; and integrated city programs in Italy for Aversa, Caserta, Salerno, and several others.

> 9 Similar conclusions are reached also by Farole et al. (2018).

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