Guidance Lab > Weakest Regions > key findings & learning

For the universe of the Less Developed Regions in Europe, 

a positive average impact of Cohesion Policy has been detected on economic growth and local employment (Pellegrini et al. 2013; Becker et al., 2010; 2013a; Crescenzi & Giua, 2020); innovation capacity and transport infrastructure (Ferrara et al., 2017), firms’ employment and value added (Bachtrögler et al., 2020). 

Effects on total factor productivity are on average absent (Bernini & Pellegrini, 2011; Ciani & de Blasio, 2015; Albanese et al., 2021) as well as those on wellbeing as captured by economic, educational, health, social and environmental outcomes (Albanese et al., 2024a). 

Some LDRs regions receive too much funding (Becker et al., 2012): the return of Cohesion Policy appears to increase with the intensity of spending only up to a maximum point, beyond which the marginal return decreases (Cerqua & Pellegrini, 2018). This does not apply when considering more comprehensive development policies related to regional well-being (Ferrara et al., 2022). 

In general, the impact of the policy in LDRs depends on the regional capacity to absorb (i.e. effectively use and manage) available funds (Becker et al., 2013a), the regional quality of government (Accetturo et al., 2014) and the regional endowment of human capital (Becker et al., 2013b). The presence of specific contextual characteristics, such as a weak institutional context and scarse ability to produce and absorb R&D, also discriminates the impact of sector-specific investments such as R&D (Crescenzi et al., 2020; Celli et al., 2021), which also depends on the regional capacity to absorb and productively use new knowledge (Becker et al., 2013b).  

Finally, transfers can cause unwanted effects: recipients regions faced a deterioration of the endowments of trust and cooperation (Accetturo et al., 2014). 

For LDRs in specific national contexts,  

a positive and significant impact on local employment has been confirmed for the pre 2000 Cohesion Policy in the Italian Mezzogiorno, without displacement effects on nearby untreated areas (Giua, 2017), on the regional labour market in United Kingdom for the whole period 2000-2014 (Di Cataldo, 2017), and on labour productivity growth in Germany for the period 1994-2006 (Alecke et al., 2013), although only up to a certain maximum treatment intensity (Mitze at al., 2012). When looking at the programming period 2000-2006 the positive impact of cohesion policy is confirmed only for LDRs in Germany and in the UK, but not for those in Italy and Spain (Crescenzi & Giua, 2020). 

In addition, at least for the italian LDRs, Cohesion Policy fails to ensure economic growth in a long-term perspective (Barone et al., 2016), unless for regional contexts that increased their relative GDP per capita via substantial public investments in infrastructures and local businesses (Cerqua & Pellegrini, 2023). For what concern sectorial interventions, a higher productivity growth potential of the policy is associated to the service when the weight of this sector is lower, whereas in those cases when services are already consolidated directing resources to this sector results in lower growth rates (Percoco, 2017). 

At the meantime, again for Southern Italy, increasing the amount of funds reduce the degree of political accountability and can lead to an increase in the incidence of corruption: without the disbursement of EU funds, the annual number of economic crimes would have been lower (De Angelis et al., 2018). 

Other policy experiences in Italian Mezzogiorno  

exist since the unification of Italy, in addition to and/or before the EU Cohesion Policy, being implemented with the purpose of supporting the development of the weakest regions of the country:  

The Cassa per il Mezzogiorno (implemented over four decades in the second half of the twentieth century) has contributed to the growth of the local economies: municipalities receiving public money experienced a larger increase in the number of plants and employed workers than their unfunded counterparts; however, during the last phase (1971–1991) these gains were nullified or even reversed in municipalities that formerly belonged to the Kingdom of the Two Sicilies, with critical cultural norms inherited from the past (e. g. low levels of cooperation and trust) negatively affecting policy effectiveness (d’Adda & de Blasio, 2017). As an unwanted side effect, the Cassa per il Mezzogiorno has permanently altered citizens' preferences for redistribution and state intervention (D'Adda & de Blasio, 2017), shaping actual voting behaviour (Albanese et al., 2021c; Albanese et al., 2024b). 

The Law 488/1992 offered massive financial support to manufacturing firms willing to invest in lagging areas. Its impact has been judged positive and significant (Cerqua & Pellegrini, 2014), with crowding out effect on non-subsidized firms and over time highlighted by Bronzini & de Blasio (2006). 

Contratti d’Area (Area Contracts, ACs), designed in 1996 for a few locations among the areas affected by deep industrial decline, attributed the initiative to apply for funds to local governments: the application consisted of a fully-fledged plan for the development of the area that included a series of private and public investments, and they were evaluated by the Central Government that choses where to channel the funds. The program was largely ineffective in steadily increasing turnover, investment or employment (Accetturo et al., 2020). 

Patti Territoriali (Territorial Pacts, TPs), a bottom-up strategy established in 1997 to trigger growth and employment in the Italian backward regions, was largely ineffective in stimulating growth during the 1997-2007 period (Accetturo & de Blasio, 2012).  

Contratti di Programma, a major Italian place-based policy through which the state financed industrial projects proposed by private firms, produced a limited impact on plant and employment growth rates, confined to a small area and causing crowding out of economic growth for surrounding areas (Andini & de Blasio, 2013).  

Investment Tax Credit, enacted by the Law 388/2000 to reduce the cost of acquiring capital to firms, has been effective in stimulating investment but due to its automatic character presents a critical fiscal sustainability being soon downsized (Bronzini et al., 2008).  

Finally, Obiettivi di Servizio, a scheme implemented in the 2007–2013 period to achieve public service delivery targets, has been only partially successful, with impacts varying due to local institutional quality (Barone et al., 2018).  

Existing causal evidence is still inconclusive or lacking on relevant aspects:  

among the factors that are considered as capable to condition the final results of the policy in LDRs, there is a big absent: the role of the administrative governance of the policy and of its implementation (Bachtler et al., 2023). These aspects have largely been studied from a descriptive perspective, but have not yet been included in causal analyses that identify the role they play in conditioning the net impact of the policy: by examining the determinants of project implementation delays within the 2014-2020 cohesion policy in Italy Crescenzi et al. (2021) reveal that the involvement of multiple levels of governance can hinder timely implementation, with EU programs generally accumulating fewer delays than national ones, and pre-negotiation processes, compared to direct awards or calls for bids, being beneficial for more accurate project realization. The study underscores the complexity of implementing projects with multiple actors or across various territories, despite their potential benefits for knowledge exchange, collaborative research, and scale economies. Del Monte et al. (2022) also shows that central authorities play a key role in reducing project completion times, especially in areas with low institutional quality. According to Polverari et al. (2020) the effective use of external support for administrative capacity-building depends on political commitment to good governance. Moreover, maintaining the continuity with an experienced staff is able to positively make the difference (Bachtrögler-Unger et al., 2022).   

Starting from these evidence causal analyses should focus on the conditioning role of the whole ‘ecosystem’ of cohesion policy administration – not just managing authorities, but also intermediate bodies, beneficiaries and all involved stakeholders, which have different roles, functions and also interests.   

The interaction of different policies on the ground is another aspect that appears relevant from descriptive analysis (Crescenzi & Giua, 2016) and that still needs to be investigated from a causal perspective. This is far more important nowadays, as PNRR operates in addition to the other (long lasting) EU and ordinary national policies.  

Finally, we know from many studies employing spatial econometrics that the impact of territorial policies is hardly contained in the delimited targeted areas: spatial spillovers of different types are likely to arise (Dall’erba et al., 2007; Dall’erba & Le Gallo, 2008; Bouayad-Agha et al., 2011; Bourdin, 2018). In general, untreated territories/subjects might experience from the policy displacement of economic activities (negative effects) or a synergistic propulsive role (positive effects). The causal mechanisms under these secondary order effects and their heterogeneity deserve further investigation (Amendolagine et al., 2024). 

More actionable measures will be provided starting from the research we are carrying out within the project (cfr. Policy Targeting). Any recommendations from academics or practitioners are welcome. Please use our contacts to contribute to this Guidance Lab at any stage! 

References

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