Gaining in impacts by leveraging the policy mix: Evidence from the European Cohesion Policy in more developed regions

This paper investigates how the overall impact of the European Cohesion Policy depends on the composition of the regional investment in Hard (infrastructure) and Soft (business and technical support) projects. The study employs a generalized propensity score (GPS) analysis in a multidimensional treatment context. In particular, the two dimensions considered are given by the Hard and Soft investments. The GPS estimation is based on a set of relevant idiosyncratic features of the regions. The second step estimates a dose-response function in a two-dimensional setting. The results confirm the existence of nonlinearities in the effect of different amounts of funds, but more importantly, show a degree of complementarity between Hard and Soft investment and that for policymakers, it is crucial to exploit such features to achieve more significant impact. The EU's more developed regions could have achieved a doubled GDP p.c. growth rate by pursuing a policy mix where Hard investments are reduced in favor of Soft investments. This improvement is comparable to the one obtained by at least doubling the available resources. The findings add to the evidence collected on the impact of the Cohesion Policy, suggesting a shift of the debate from the quantity to the quality of the expenditure pursued under the umbrella of territorial policies.