Assessing regional digitalization in Europe: A spatial composite index approach

We develop composite indices to assess regional digitalization at the NUTS 2 level in Europe. Building on the structure of the Digital Economy and Society Index, a first baseline index is created using Principal Component Analysis. The framework is extended through Geographically Weighted Principal Component Analysis and spatial filtering to account for spatial heterogeneity and dependence. The introduced approach distinguishes between regions benefiting from digital spillovers and those limited by geographic isolation. We therefore add on a method to classify spatial winners and losers based on the regional digital performance. This tool can be used to assess territorial disparities and design local policies for digitalization. • Regional digitalization and digital divide are measured through composite indices. • Our study develops a regional index based on the EU Agenda to assess digital disparities. • We develop spatially enhanced composite indices to assist European digital strategy. • We highlight how spatial spillovers drive regional digital economy and society. • Our study ranks regional economies by the ability to exploit spatial externalities.