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Private investment, R&D and European Structural and Investment Funds: crowding-in or crowding-out?

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  • De Santis, Roberto A.
  • Vinci, Francesca

Abstract

We employ a novel regional dataset on European private investment and business R&D spanning the years 2000 to 2021, along with comprehensive historical data on European Union Structural and Investment (ESI) funds, to estimate whether ESIfunds have crowding-in or crowding-out effects on private investment and business R&D. Our analysis, leveraging regional variation and a fiscal instrument immune to region-specific shocks, reveals a significant crowding-in effect, with 1 euro in ESI funds increasing private investment by 1.1 euros and business R&D by 0.1 euros after two years. The effect is stronger in developed regions for private investment and in less developed regions for R&D. Additionally, crowding-in effects are stronger in regions where corporate private debt is relatively higher. Among the different ESI funds, the Cohesion Fund (CF) shows the largest estimated impact, while the European Regional Development Fund (ERDF) yields somewhat smaller but statistically more robust results. JEL Classification: E22, H54, O38, O52, R11, R58

Suggested Citation

  • De Santis, Roberto A. & Vinci, Francesca, 2025. "Private investment, R&D and European Structural and Investment Funds: crowding-in or crowding-out?," Working Paper Series 3098, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20253098
    Note: 185689
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    References listed on IDEAS

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    1. Alberto Alesina & Francesco Giavazzi, 2013. "Fiscal Policy after the Financial Crisis," NBER Books, National Bureau of Economic Research, Inc, number ales11-1, December.
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    Keywords

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    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • 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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