Revitalizing regional economies through enterprise support policies: An impact evaluation of multiple instruments

Although enterprise support policies continue to be favored by policymakers in the European Union (EU) as tools for regional revitalization, there is as yet insufficient empirical evidence examining the effects of the policies on socially relevant outcomes. This paper helps fill that gap by utilizing firm-level data to offer robust counterfactual impact evaluation evidence on the employment effects of the coexisting European Regional Development Fund (ERDF) co-sponsored, national and regional programs commonly operated in many EU regions. By using data from a large northern Italian region, the analysis yields employment impact estimates of the policies under plausible identification assumptions. The paper finds no significant difference between the employment impacts of ERDF co-funded and national/regional programs, whereas, regardless of the funding body, the absolute per-firm employment effects of the programs are increasingly larger the higher the economic value of the incentives. However, the most generous incentives come with a much higher cost per each additional new job. The analysis also shows that the absolute per-firm employment effects of soft loans are similar to those of capital grants, but, because soft loans cost much less, they are more effective from a policy perspective.