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What are the likely macroeconomic effects of the EU Recovery plan?

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  • Pappa, Evi
  • Canova, Fabio

Abstract

We examine the macroeconomic effects of two EU regional structural funds. ERDF has positive short term average consequences on all regional variables, but gains typically dissipate within three years. ESF has insignificant average impact effects, but medium-term multipliers are positive and economically important. There are differential regional transition paths and outlooks for economic transformation. Location, level of development, EU tenure, Euro area membership, and national borders account for the asymmetries. We interpret the facts with an equilibrium model of a monetary union featuring endogenous growth. Structural features and public administration characteristics can explain the observed asymmetries. The policy implications for the Recovery and Resilience facility are discussed.

Suggested Citation

  • Pappa, Evi & Canova, Fabio, 2021. "What are the likely macroeconomic effects of the EU Recovery plan?," CEPR Discussion Papers 16669, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:16669
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    More about this item

    Keywords

    Recovery and resilience fund; Countercyclical policies; Regional inequalities; R&d and human capital investment; Externalities;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General

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