What are the Likely Macroeconomic Effects of the EU Recovery Plan?

53 Pages Posted: 15 Nov 2021

See all articles by Fabio Canova

Fabio Canova

BI Norwegian Business School

Evi Pappa

Universidad Carlos III de Madrid

Date Written: October 1, 2021


We examine the macroeconomic effects of two EU regional structural funds. ERDF has positive short term average consequences on all regional variables, but gains typically dissipate within three years. ESF has insignificant average impact effects, but medium-term multipliers are positive and economically important. There are differential regional transition paths and outlooks for economic transformation. Location, level of development, EU tenure, Euro area membership, and national borders account for the asymmetries. We interpret the facts with an equilibrium model of a monetary union featuring endogenous growth. Structural features and public administration characteristics can explain the observed asymmetries. The policy implications for the Recovery and Resilience facility are discussed.

Keywords: countercyclical policies, Externalities, R&D and human capital investment, Recovery and Resilience fund, Regional inequalities

JEL Classification: C32, E27, E32, H30

Suggested Citation

Canova, Fabio and Pappa, Evi, What are the Likely Macroeconomic Effects of the EU Recovery Plan? (October 1, 2021). CEPR Discussion Paper No. DP16669, Available at SSRN: https://ssrn.com/abstract=3960273

Fabio Canova (Contact Author)

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442

Evi Pappa

Universidad Carlos III de Madrid ( email )

CL. de Madrid 126
Madrid, Madrid 28903

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