Workplace skills as regional capabilities: relatedness, complexity and industrial diversification of regions

The literature unanimously agrees that industrial diversification is path dependent: new industries build on the pre-existing capabilities of regions that are partly embodied and reflected in the skills of the region's workforce. This paper explicitly accounts for regional capabilities as workforce skills to build skill relatedness and skill complexity measures, that is, the skill-spaces, for 107 Italian regions for the period 2013-19. The data-driven techniques we use reveal that skill-spaces form two highly polarised clusters into social-cognitive and technical-physical skills. We find evidence that social-cognitive skills yield the highest probabilities of regional competitive advantage. A comparison with co-location-based measures shows that our measures are able to capture a substantial part of regional capabilities that cannot be measured with previous measures.