Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/325094 
Year of Publication: 
2025
Series/Report no.: 
IZA Discussion Papers No. 18036
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
We study the effects of place-based policies on aggregate productivity using administrative data on projects co-financed by the EU in Italy linked to balance sheet data. We exploit quasi-experimental variation in funding for a large place-based policy stemming from measurement error in regional GDP estimates. Results show that the policy likely decreases productivity. Decompositions reveal that aggregate declines are driven by reallocation of labor to low-productivity firms. Mechanism analysis using firm-level event studies reveals that negative reallocation effects are caused by high-productivity firms taking up the funds and subsequently becoming more liquidity constrained, leading to slowdowns in employment growth.
Subjects: 
EU cohesion policy
productivity
place-based policy
JEL: 
R11
R58
J23
Z18
Document Type: 
Working Paper

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