How institutions shape the economic returns of public investment in European regions

Inmaculada C. Alvarez (), Javier Barbero, Luis Orea and Andrés Rodríguez-Pose
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Inmaculada C. Alvarez: Universidad Autonoma de Madrid

No 2023-08, JRC Working Papers on Territorial Modelling and Analysis from Joint Research Centre

Abstract: In this paper, we examine the impact of institutional quality on the returns on key drivers of economic growth in 230 European Union (EU) NUTS-2 regions from 2009 to 2017. To estimate region-specific elasticities, we employ a latent class modelling approach, considering the quality of government and the degree of authority in each region as mediators. Our findings reveal significant variation in the returns to education, physical capital investment, and innovation across regions. Moreover, we observe that changes in government quality and regional authority influence the ability of EU regions to leverage different types of investment effectively. These results emphasize the importance of considering the government quality in regions where investments are made in order to maximize the returns on European Cohesion investment.

Keywords: Institutional quality; European funds; public investment; regional development (search for similar items in EconPapers)
JEL-codes: E61 H54 O43 R11 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2023-08
New Economics Papers: this item is included in nep-eff, nep-eur, nep-inv, nep-sbm and nep-ure
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Working Paper: How institutions shape the economic returns of public investment in European regions (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:ipt:termod:202308

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