Pnrr and the South, when European funds increase inequality

The EU plan allocates 40 percent of resources to the South: there is the danger that, in addition to the money not spent, there will be money spent unnecessarily. The example of Molise

What if policies to reduce territorial inequalities in Italy ended up exacerbating inequalities within individual territories? Understanding this is fundamental, both because they mobilize huge resources and because their goal is of primary importance. All the more reason this question should be taken seriously now that the Pnrr allocates 40 percent of its funds to the South. In recent years, economic research has helped to shed light on these problems, helping decision-makers (if they have the will) to design more effective and targeted policies. Lastly, a study by Giuseppe Albanese, Guglielmo Barone and Guido de Blasio, soon to be published in the journal “Economica”, rings an alarm bell. The authors exploit what in jargon is called “natural experiment”: in 2007 Molise left the so-called Objective 1, and therefore lost the right to receive the most generous aid. Thus, funding fell from 137 to 66 euros per capita, leading not only to a discontinuity over time, but also to different treatment compared to neighboring regions which continued to benefit from higher subsidies. By comparing the municipalities on both sides of the border – which have very similar socio-economic characteristics – one can observe the impact of the change on inequality.