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Bridging the gap in innovation: the case of regional R&D subsidies in Southern Italy

Author

Listed:
  • Antonio Veronico

    (Bank of Italy)

Abstract

This paper estimates the causal impact of a regional R&D subsidy funded with EU cohesion funds in favour of small and medium firms operating in Puglia, a region in Southern Italy that has historically lagged behind. I leverage firms' balance sheets and a unique regional administrative dataset on subsidy payments to study how this policy affected the R&D investments, productivity, and survival probability of recipients. By adopting a recently developed match-in-diff approach and using a control group of eligible but unsubsidized firms, I first show that the treated firms display higher survival compared with control firms. Then, I find that the policy was successful in stimulating additional investments in intangible assets. The policy also had positive effects on the number of workers employed in the treated firms. However, I do not find any impact on tangible assets, value of production, and productivity.

Suggested Citation

  • Antonio Veronico, 2026. "Bridging the gap in innovation: the case of regional R&D subsidies in Southern Italy," Temi di discussione (Economic working papers) 1526, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_1526_26
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    File URL: https://www.bancaditalia.it/pubblicazioni/temi-discussione/2026/2026-1526/en_tema_1526.pdf
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    Keywords

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    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L53 - Industrial Organization - - Regulation and Industrial Policy - - - Enterprise Policy
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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