Alexander Lembcke (p)

Riccardo Crescenzi

How will the revival of industrial policy affect regional development and interact with regional development policies? This presentation will draw on recent OECD work on barriers to firm growth, promotion of high-growth enterprises, innovation (and innovation diffusion) and growth in general to reflect on how industrial policy can be harnessed for regional development.

Riccardo Crescenzi (p), Guido de Blasio , Mara Giua, Viviana Celli

Anabela Santos

This paper explores the role of governance in policy implementation, using the European Union (EU) Cohesion Policy as a case study. Leveraging a quasi-natural experiment in Italy, where certain projects were shifted from EU to national management, we evaluate the impact of governance structures on financial execution. Using a non-parametric generalization of the difference-in-differences estimator, we find that otherwise identical projects achieve better financial execution under EU governance. Projects reassigned to national management experience a significant slowdown in financial execution within ten months, with delays reaching nearly 20% after 24 months. These delays are particularly pronounced when projects are managed at the sub-national level rather than by the national government. Our findings contribute to the broader policy debate on the effectiveness of multi-level governance structures in public investment programs.

Anabela Santos (p), Andrea Conte, Giovanni Giovanni Cerulli

Vassilis Monastiriotis

This paper investigates the impact of Cohesion Policy and Horizon 2020 funding on regional economic growth, with a specific focus on investments in digitalization. While both funding programs aim to foster innovation and regional development, their combined effect on digital transformation remains insufficiently explored. Using a novel dataset at the NUTS 2 level, we assess how these financial instruments have influenced digital investment patterns and contributed to regional growth. Through econometric analysis, we identify key drivers of synergy between these funding mechanisms and evaluate their role in supporting digital adoption across European regions. The findings provide valuable insights into the effectiveness of EU funding in driving digitalization-led growth and offer policy recommendations to strengthen complementarities between regional and research-driven funding initiatives.

Vassilis Monastiriotis (p), Tea GAMTKITSULASHVILI

Luis Galiano Bastarrica

For decades prior to the Global Financial Crisis, the EU had a clear ‘division of labour’ between its regional and (rudimentary) industrial policy. Developments since the early 200s, however, saw the two policies converging both in character and in the ideas underpinning them. Cohesion Policy started incorporating modern epistemic ideas about ‘entrepreneurial discovery’, ‘related diversification’ and ‘place-based policy’; while industrial policy became increasingly more activist, deploying strategic planning and targeting investment-driven economic restructuring and innovation aiming at ‘directing’ growth and addressing ‘system failures’. Soon, however, and increasingly after the COVID pandemic and the ‘polycrises’ that have followed, EU’s industrial policy ambitions catapulted. The launch in 2019 of the European Green Deal saw the introduction of mission-like ambitions for decarbonisation, energy independence and digital leadership (under the so-called twin transition). Subsequent geopolitical developments led to the re-elaboration of such ambitions, introducing mission-like pursuits for ‘economic sovereignty’, ‘open strategic autonomy’, the ‘resilience of the Single Market’ and the defence of Europe’s ‘values and social market traditions’.
In this paper we examine how these evolutions have affected the ability of Cohesion Policy to deliver on its goals of territorial cohesion and balanced growth and address issues of regional development and inequality. We start by reviewing the evolution of the two policy areas (cohesion/regional and industrial/innovation) and identifying the main concepts and theoretical ideas that underpin them. We argue that despite the ‘entrepreneurial shift’ of Cohesion Policy and the ‘interventionist shift’ of industrial policy, the recent orientation of the latter towards macroscopic, mission-like, objectives has created a ‘misalignment’ between the two policy areas and their objectives (development, whether national or subnational), potentially undermining processes of regional development and convergence supported by Cohesion Policy. We then turn to a ‘forensic’ empirical investigation, examining the spatial footprint of a number of policy initiatives (Industrial Alliances, Sensitive Ecosystems, CRM Board, IPCEIs) and funding schemes (Horizon, RRF, European Innovation Council grants). We show that, by and large, the new industrial policy initiatives of the EU are at odds with the priorities and sectoral-geographical targeting of Cohesion Policy. Funding instruments and state-aid targeting appear to be inversely redistributive, potentially amplifying territorial inequalities; while mission-like initiatives (decarbonisation, resource autonomy) seem to concentrate disadvantages to those regions more likely to be targeted by Cohesion Policy. We conclude with some recommendations on how the two policy areas can be realigned, so as to successfully deliver on their corresponding strategic objectives.

Luis Galiano Bastarrica (p), Jorge Lopez Alvarez

Alexander Lembcke

Understanding and quantifying the interlinkages within “high tech” industries in EU27 is fundamental in the design and implementation of effective EU regional policies. The context of the Von der Leyen II Commission, characterised by mainstreaming competiveness in all EU policies, positions “high tech” industries as a key leverage to strengthen the EU’s economic security. What remains a key question is whether increasing investments in those industries, for instance through a reformed post-2027 Cohesion Policy, might increase regional disparities. This research presents a novel application of the JRC’s “CARMEN” model (Computational Analysis of Regional Multipliers of the European Economy). Through its regional input-output architecture, which includes all EU27 NUTS2 territories in 56 industries covering the whole EU economy, the model calculates a decomposition of domestic value added in intraregional, interregional and feedback effects for a cluster of high tech regions and industries. The findings show that investments in high tech tend to remain within those industries and regions; not generating substantial spillover effects to the rest of the EU27 economy, and that such investments risk exacerbating urban-rural and north-south divides in the EU. Such findings hold consistently across different formulations of the high tech cluster, and point to a characterisation of such industries as “deep pockets” where resources tend to stay confined – to a large extent not percolating to the rest of the EU27 economy.