NextGenerationEU landing: assessing the territorial allocation of Italy's Recovery and Resilience Facility funding

In response to the COVID-19 crisis, the European Union introduced NextGenerationEU, its largest stimulus package to date. We focus on Italy, the program's largest beneficiary, and analyse the territorial distribution of funds. Although centrally coordinated, most expenditures were awarded through calls and implemented by local governments. Using a sample of approximately 4500 Italian municipalities for which administrative-efficiency measures can be constructed, we estimate a two-stage Heckman selection model to distinguish between realized access to funding and award intensity conditional on participation. Results show that funds are disproportionately allocated to Southern, relatively poorer urban municipalities with stronger administrative capacity and prior experience with EU Cohesion Policy. We then test if, across different policy areas, funds were targeted following specialization or convergence logics. We find that, across some of the key policy areas, such as digital, education and healthcare, the allocation is reinforcing existing spatial specialization, as opposed to targeting “lagging behind” territories. Finally, we uncover how administrative efficiency and stronger local governance are significant predictors of reduced project delays, while we do not find a significant North-South divide here. Taken together, these findings highlight key allocative trade-offs and the uneven administrative capacity of territories expected to implement the program.