This paper shows how granular subnational data reveal asymmetries invisible in national aggregates by constructing indicators of fiscal autonomy, revenue composition and fiscal dependence for Italian regional and municipal governments using the novel OECD’s REGOFI and MUNIFI databases. The analysis documents persistent asymmetries along three distinct layers: the constitutional divide between special-statute regions (SSRs) and ordinary-statute regions (OSRs), the north–south development gradient, and the contrasting patterns between governmental tiers. SSRs exhibit markedly higher fiscal autonomy and substantially lower transfer dependence. At the municipal level, the pattern reverses: ordinary-region municipalities show higher own-revenue ratios, producing a configuration of autonomous regions with dependent municipalities versus dependent regions with more autonomous ones. The north–south gradient remains pronounced municipally, where large revenue asymmetries coexist with broadly convergent per capita expenditure. This nominal equalisation cannot be taken as evidence of equivalent service provision. From a policy perspective, greater regional differentiation should be balanced with effective equalisation mechanisms to avoid adverse consequences for service provision in poorer regions.

The 2021-2027 cohesion policy programme is required to deliver on the European Union's green transition priority facilitating reaching net zero emissions by 2050. Our analysis shows that green investments under this policy are expected to have a positive impact on GDP and employment, particularly in less developed regions. These investments can help reduce the costs of the transition, and also have the potential to reduce greenhouse gas emissions. However, cohesion policy alone cannot drive the transition and additional instruments and actions should be put in place to support all European territories. (c) 2025 The Author(s). Published by Elsevier Inc. on behalf of The Society for Policy Modeling. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/). JEL classification: C68; R13; Q58

The European Union (EU) has committed nearly €175 billion to digital investment across the EU-27 Member States. How much does this spending actually deliver, and who benefits most? We address these questions using a dynamic multi-country, multi-sector general equilibrium model calibrated for all EU economies, drawing on a novel dataset spanning fifteen categories of digital intervention across five major EU funding instruments. We find that digital investment generates sustained gains in gross domestic product (GDP) and employment across the EU, with significant cross-border spillovers that remain evident twenty years after implementation. Less digitalised economies in Southern and Eastern Europe experience the largest absolute GDP gains, while more advanced economies in Northern and Western Europe achieve higher GDP multipliers, reflecting stronger absorptive capacity and higher levels of economy-wide digital readiness. The positive correlation between digital readiness and investment returns suggests that closing the EU’s digital divide requires not only more investment, but investment targeted at building the conditions under which that investment is most productive

We use a spatial dynamic computable general equilibrium model incorporating a macroeconomic measure of educational mismatch and endogenous labour participation for three different educational groups. Our objective is to assess the impact of the European Social Fund's investments in labour productivity on both regional macroeconomic educational mismatch and employment. The analysed labour market interventions generate positive long-run effects on GDP and employment in all regions, with interesting implications for educational mismatch. Raising the productivity of the low educated workers reduces mismatch, while targeting the medium educated leads to relatively smaller reductions. Interventions targeting the highly educated result in an increase in mismatch, although they generate larger increases in GDP, implying the existence of a trade-off. Its intensity depends on the initial regional economic conditions as well as on the size of the policy interventions.

Standard measures of fiscal decentralisation often group subnational levels together, concealing differences in regional and municipal public service provision, financial contributions and taxing power. We address this gap by constructing refined granular decentralisation indicators for 22 countries using novel OECD data on regions and municipalities between 2010 and 2021, focusing on actual subnational autonomy over budgetary items. We examine the comparative role of transfers, tax revenues and other own revenue sources in subnational governments’ finance, considering the implications for vertical and horizontal imbalances. Our findings, which complement the existing evidence on fiscal decentralisation based on established data sources, reveal two models of decentralisation: one in which municipalities have significant revenue and expenditure powers, and another in which regions dominate. Notably, while some countries choose not to devolve powers to regions, all maintain at least some degree of fiscal and service provision autonomy at the municipal level. From a policy perspective, our research contributes to the fiscal decentralisation literature by highlighting the importance of distinguishing between regional and municipal governments in a country’s multilevel fiscal structure concerning revenues, public service delivery, and responsibilities.

Abstract European industrial policy relies on two major programmes operating under different logics: the place‐based Cohesion Policy, which directs investment towards less developed regions to reduce territorial disparities, and the mission‐led Horizon 2020, which allocates funding competitively to promote research and innovation. Using the RHOMOLO spatial dynamic computable general equilibrium model calibrated for all 235 European Union (EU) Nomenclature of Territorial Units for Statistics‐2 regions, we first examine the macroeconomic impact of each policy as actually implemented and then compare place‐based and mission‐led approaches under a normalised framework that holds total funds constant, isolating the role of policy design from that of fund volumes. Mission‐led allocations generate higher long‐run GDP returns but increase regional inequality and yield lower employment gains, whilst place‐based allocations reduce disparities and support substantially more employment. These results are driven primarily by the territorial distribution of funds, with direct implications for the design of EU industrial policy amid the ongoing reform of Cohesion Policy.

This paper maps the geography of artificial intelligence (AI) innovation, exposure and use across European Union (EU) NUTS-2 regions using six complementary indicators. Findings reveal a spatial paradox: while AI exposure and worker-level use are relatively widespread, innovation and firm-level adoption remain concentrated in high gross domestic product (GDP), human capital-intensive hubs. A persistent implementation gap separates structural exposure from productive use, driven by institutional, organisational and capability-related frictions. Income and human capital are strongly associated with AI activity, while trade openness shows a negative relationship. Results point to the need for place-sensitive policies combining support for leading regions with targeted capability-building in lagging ones.

We use a spatial dynamic general equilibrium model calibrated for 235 regions in the European Union to identify the determinants of regional multipliers associated with government spending shocks. We show how the size of the local fiscal spending multipliers is determined by the response of different GDP components, and we simulate several scenarios to explore the importance of the way in which the increased spending is financed, as well as trade openness and labour market tightness. We use econometric estimates to identify the regional characteristics that determine the size of the multipliers based on the simulation outcomes. Our results suggest that higher trade and savings generally reduce the effectiveness of fiscal interventions, while higher unemployment increases it. Our methodology provides a full set of multipliers at NUTS 2 level that can be traced back to economic fundamentals, which can be modified in different scenarios for robustness purposes. These findings provide valuable policy insights relevant to the debate on the effectiveness of fiscal policy in Europe.

We contribute to the debate on the implementation of fiscal policy in a supranational federation by examining the role of financing mechanisms and international coordination for policy programmes. We use a computable general equilibrium model calibrated to the NUTS-2 regions of the European Union to simulate the impact of Cohesion Policy under different configurations over a 20-year period. Using different scenarios, we disentangle the implicit fiscal equalisation related to shared financing responsibility and the internalisation of international spillovers. The results show that a national implementation of the same interventions would reduce the macroeconomic impact of the policy and the gains in economic convergence. We find that the two channels affect different groups of regions depending on their relative level of development within the country and their trade openness.

We evaluate the economic impact of the Horizon 2020 innovation policy using a spatial dynamic general equilibrium model incorporating R&D-based semi-endogenous growth and calibrated for 235 NUTS2 regions of the European Union. The results suggest that the policy can have a positive impact on GDP and job creation, with considerable regional heterogeneity. The GDP gains are expected to be significant in the long run, due to the positive productivity effects of innovation policy funding. Our model provides insights into policy spillovers through production factor dynamics, trade linkages and innovation diffusion, and constitutes an example of how to assess the impact of innovation policy beyond individual projects and towards mission-oriented monitoring.

We quantify the system-wide impact of the European Structural Funds 2014-20 using a largescale spatial general equilibrium model, calibrated for 89 regions in the EU and the UK. We find that policies that stimulate private and public investment have larger and longer-lasting effects than demand-side policies. In the latter case, the model shows a rapid adjustment to the post-policy equilibrium, which limits the legacy effects of the interventions. In addition, we show the importance of agents' expectations in assessing the impact of the interventions supported by the funds. A model with perfect foresight tends to predict smaller impacts than a model with myopic agents would imply. The regional distribution of the differences in GDP impact between the two variants of the model suggests that the largest deviations are recorded for net beneficiary regions, with interesting implications for perceived policy persistence, the nature of interventions, and their long-term effects.

We study the impact of energy efficiency improvements and associated rebound effects on regional economies in the European Union. We use a spatial dynamic computable general equilibrium model calibrated for 235 regions and 11 sectors. Our results suggest that the magnitude of the rebound effect differs when using multi-regional models compared to single-region or country models, mainly due to the endogeneity of trade flows. The results we obtain allow us to reconcile two opposing findings in the literature on the relationship between short-run and long-run rebound effects. Finally, we examine the role of regional pre-shock conditions in determining the variability of rebound effects across regions, such as trade openness and energy intensity. The latter explains about 65% of the variability in regional rebound effects, while pre-existing trade relations contribute up to 20%.

Subnational governments are increasingly involved in the implementation of the Sustainable Development Goals (SDGs). In Europe, the policy efforts to achieve the SDGs increasingly recognise the importance of regional disparities and structural differences between regions, issues that have historically been addressed by European cohesion policy. In this paper, we quantify the potential impact of the European cohesion policy 2021–2027 on three interrelated SDGs in NUTS 2 regions of the European Union, using a spatial dynamic general equilibrium model. Our results suggest that cohesion policy can deliver significant results for SDGs 1, 8 and 10, which relate to poverty reduction, inclusive economic growth and reduction of economic disparities, respectively.

We present the main features of a newly constructed set of interregional social accounting matrices for the year 2017 for all regions of the European Union. We analyse interregional trade flows, the secondary distribution of income, and wages at different levels of educational attainment. The latter is achieved through a combination of micro and macro data. Our results provide new insights into the patterns of interregional trade in Europe and allow us to analyse the main characteristics of the regions according to the main destination of their exports, be it another region in the same country, within the EU or outside the EU.

We use a spatial general equilibrium model to assess the macroeconomic and distributional impact of the European Commission's Recovery and Resilience Facility (RRF). We employ two alternative regional distributions of investments: one based on the regional share of population only, and the other based on Cohesion Policy criteria. Our results suggest that the disbursement of RRF grants would lead to an increase in the European Union's gross domestic product (GDP) of approximately 0.85% in 2026, corresponding to a present value GDP multiplier of 1.22. The latter rises to 3.25 in the long run. Under the population criterion, GDP impacts are higher relative to the Cohesion criterion, at the detriment of territorial cohesion.

In this study we use a spatial dynamic general equilibrium model to analyse the macroeconomic impact of cohesion policy-like investments in nine net beneficiary member states of the European Union. We examine whether or not the objective of reducing regional disparities (equity) prevents the interventions from maximising their impact on national GDP impact (efficiency) by looking at GDP multipliers and interregional spillovers. We find that there may be an equity-efficiency trade-off depending on the characteristics of both the investments made and the targeted regional economies. Moreover, the analysis shows that the growth spillovers from more developed to less developed regions are limited. This implies that, in order to reduce regional disparities, investment must be made in the less developed regions of each country.

Building on the case of European Union (EU) regions, we study the macroeconomic impact of related diversification. We use an indicator of technological related variety in combination with stochastic frontier estimation and a well-established general equilibrium model to assess the rationale for related diversification and to understand the relevance of different region-specific policies. The results suggest that related diversification has a greater potential for less advanced regions than for more advanced ones. This has interesting implications for industrial policy, calling for a differentiated approach depending on the technological space and level of development of different regions.

We assess the macroeconomic impact of the European Union Cohesion Policy investments deployed during the 2014-20 programming period, with a particular focus on territorial cohesion and regional disparities. We use a spatial dynamic general equilibrium (RHOMOLO) to quantify the direct and indirect effects of the policy investments in the NUTS-2 regions of the European Union within a 20-year time frame. The results suggest that the impact of the policy is sizeable, especially in the less developed regions of the European Union. Accordingly, socio-economic disparities at the regional level are shown to decrease thanks to the policy intervention.

Do investments in Information and Communication Technology (ICT) create jobs? The literature suggests that, even if innovations are labour saving, there may be compensating mechanisms that lead to a positive employment effect. We investigate this issue using country-level data for the European Union from 1995 to 2019. The results suggest an average positive net effect of ICT investment on total employment. An increase of €100,000 in the ICT investment stock is associated with an average increase of 3.3 jobs in the European Union. However, the magnitude of the impact is heterogeneous across countries. The differences are explained by the country-specific characteristics of ICT investment (non-machine versus machine-based) and the existing skill endowment of the labour force. Moreover, the rate of return on investment expressed in terms of net job creation tends to decline over time, as the share of high-skilled workers in the market increases.

We analyze the general equilibrium effects of an asymmetric decrease in transport costs, combining a large-scale spatial dynamic general equilibrium model for 267 European NUTS-2 regions with a detailed transport model at the level of individual road segments. As a case study, we consider the impact of the road infrastructure investments in Central and Eastern Europe of the European Cohesion Policy. Our analysis suggests that the decrease in transportation costs benefits the targeted regions via substantial increases in gross domestic product (GDP) and welfare compared to the baseline, and a small increase in population. The geographic information embedded in the transport model leads to relatively large predicted benefits in peripheral countries such as Greece and Finland, which hardly receive funds, but whose trade links cross Central and Eastern Europe, generating profit from the investments there. The richer, Western European nontargeted regions also enjoy a higher GDP after the investment in the East, but these effects are smaller. Thus, the policy reduces interregional disparities. There are rippled patterns in the predicted policy spillovers. In nontargeted countries, regions trading more intensely with regions where the investment is taking place on average benefit more compared to other regions within the same country, but also compared to neighboring regions across an international border. We uncover that regions importing goods from Central and Eastern Europe enjoy the largest spillovers. These regions become more competitive and expand exports, to the detriment of other regions in the same country.