Riccardo Crescenzi (p), Juan Alvarez-Vilanova, Marco Di Cataldo

Luca Serafini

As the world transitions to net-zero emissions, goods and services are increasingly incorporating green attributes. Achieving this shift requires new and diverse technologies and processes to deliver sustainable products from conception to end use (and beyond). Securing the capital, skills, and knowledge for this green transition is one of the greatest challenges of our time, particularly in less dynamic countries and regions. Foreign Direct Investment (FDI) can play a pivotal role in catalysing the green transition in host economies, yet the existing literature still lacks a clear understanding of ‘green’ FDI and how it responds to public policy.
This paper offers preliminary insights into these questions by using state-of-the-art Large Language Model (LLM) methods to identify green FDI beyond traditional sector-based definitions, providing a more nuanced view of the green transformation taking place across various industries and geographies in Europe. These emerging trends and patterns are then linked to the role of public policies by examining how national and regional authorities attract green FDI through an innovative survey.
By combining data on green FDI flows with information on the presence and timing of green FDI priority initiatives from 170 Investment Promotion Agencies (IPAs) across Europe, we investigate the effectiveness of targeted and selective policy efforts in bringing green capital, skills, and knowledge to regions, thereby supporting the green transition on the ground.

Luca Serafini (p), Emanuela Marrocu, Raffaele Paci

Federico Aresu

This paper presents a comprehensive investigation into the impact of twin transition (TT) - green and digital - initiatives on firm performance in Italy over the period 2014–2023. By examining firms’ participation in green and digital activities, the study provides valuable insights into how these investments correlate with economic outcomes, aligning with the European Green Deal’s objectives of fostering sustainable and digital growth.
The analysis integrates two Italian-focused datasets: OpenCoesione, which provides information on green and digital investments funded by the European Regional Development Fund (ERDF), and Aida, a source of firm-level data on key performance indicators such as value added, employment, and labour productivity. The study adopts a two-stage approach. First, text analysis techniques identify the green and digital content of ERDF-funded projects by analysing project titles and descriptions. Second, a Staggered Difference-in-Differences econometric approach assesses these initiatives’ temporal and firm-specific impacts on performance outcomes.
Additionally, the study explores regional disparities by comparing the effects of green and digital investments in northern and southern Italy, assessing whether adopting TT technologies can help mitigate regional inequalities. This aspect is particularly relevant given Italy’s economic divide, where southern regions often lag behind northern counterparts in growth and innovation capacity. By evaluating the differential impacts of TT initiatives, the study sheds light on whether these investments foster more balanced and inclusive economic development.
The findings are expected to highlight both the immediate benefits of TT initiatives, such as improved productivity and employment, and potential short-term challenges, including adaptation costs and varying returns. These outcomes emphasise the transformative role of TT initiatives in reshaping Italy’s corporate landscape and the need for targeted policy support to foster sustainable growth and address regional disparities. The study provides valuable insights for policymakers and business leaders to actively support firms through this critical transition.

Federico Aresu (p), Raffaele Paci, Emanuela Marrocu

George Petrakos

Cohesion Policy (CP) is a cornerstone of the European Union’s strategy to promote economic convergence among its regions by channeling resources through the European Regional Development Fund and the European Social Fund. These investments target innovation, infrastructure, and human capital, particularly in areas with lower income levels. While traditional analyses often rely on broad-based growth regressions, recent studies have shifted toward causal frameworks such as the Regression Discontinuity Design (RDD).
This paper provides a novel assessment of CP’s impact on regional growth over the period 2008–2023 by incorporating two key methodological innovations. First, it employs the extended RDD approach proposed by Cerqua and Pellegrini (2018) to explicitly account for the intensity of CP funding, recognizing that expenditure flows frequently deviate from formal programming timelines due to the “n+2” and “n+3” rules. Relying on annualized regional data from the Directorate-General for Regional and Urban Policy, we capture the actual distribution of funds rather than relying on nominal allocations. Second, this study acknowledges that CP represents only a fraction of total investment in most regions; hence, we integrate other sources of regional capital accumulation into the analysis.
We segment the 2008–2023 period into three sub-phases—encompassing the global financial crisis, the post-crisis recovery, and the onset of the COVID-19 pandemic—to examine how CP performs under varying macroeconomic conditions. Moreover, we employ a four-year lag for CP expenditures, thus focusing on medium- to long-run effects rather than immediate impacts. Our specification includes controls for human capital, technological capacity, institutional quality, and population density.

George Petrakos (p), Spyros Niavis, Dimitris Kallioras, Alexandra Sotiriou, Kleoniki Natalia Petrou

Riccardo Crescenzi

The goal of this paper is to discuss theoretical frameworks explaining why inequality may become harmful for an economy after some critical threshold and empirically assess the critical level beyond which desirable diversity in household income turns into undesirable or harmful inequality. In addition, the paper examines to what extent this threshold varies across types and dimensions of actual or perceived measurements of inequality and what are the policy implications of these. The analysis is based on secondary data and an expert survey conducted exclusively within the framework of the ESSPIN project. The results suggest that income inequalities have a non-linear impact on growth performance. Lower or modest levels of inequality appear to have a positive impact on growth, which is related to the benefits of extra effort, profit seeking endeavours, innovative ideas and persistence. However, after some level, inequality turns out to have a negative impact on growth. This turning point tends to vary with the level of development, as in more advanced countries income inequality becomes a growth barrier at earlier levels of inequality. These results have also been supported by an experts’ survey providing robust evidence for a non-linear relationship between income inequality and economic performance.