Turning the tide: how public R&D investment shapes European regional development

Abstract

This paper evaluates the impact of Mission-Oriented Innovation Policies and public R&D investment on regional economic development in Europe by quantifying the responses of GDP, employment and private R&D across 243 NUTS-2 regions from 1980 to 2019. Using linear and non-linear Local Projections methods, we find that public R&D investment generates the largest multiplicative effect and produces a greater impact in lagging regions than in leading ones, underscoring its crucial role in fostering regional convergence and driving technological advancement across European regions. Finally, our findings show that fiscal stimuli are especially effective during periods of deep recession.