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How institutions shape the economic returns of public investment in European regions

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  • Inmaculada C. Alvarez
  • Javier Barbero
  • Luis Orea
  • Andrés Rodríguez-Pose

Abstract

In this paper, we examine the impact of institutional quality on the returns of key drivers of economic growth in 230 European Union (EU) NUTS-2 regions from 2009 to 2017. To estimate region-specific elasticities, we employ a latent class modelling approach, considering the quality of government and the degree of authority in each region as mediators. Our findings reveal significant variation in the returns to education, physical capital investment, and innovation across regions. Moreover, we observe that changes in government quality and regional authority influence the ability of EU regions to leverage different types of investment effectively. These results emphasize the importance of considering the government quality in regions where investments are made in order to maximize the returns on European Cohesion investment

Suggested Citation

  • Inmaculada C. Alvarez & Javier Barbero & Luis Orea & Andrés Rodríguez-Pose, 2023. "How institutions shape the economic returns of public investment in European regions," Efficiency Series Papers 2023/03, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
  • Handle: RePEc:oeg:wpaper:2023/03
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    More about this item

    JEL classification:

    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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