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We evaluate the effectiveness of the most extensive experiment of income redistribution, that is, the European Union regional policy, at a time of economic crisis. By exploiting geographical discontinuities in fund eligibility, we analyse comprehensive data on all publicly funded Italian projects at the municipality level. We find a positive impact of localized support to firms with a sizable increase in employment and the number of plants in intensively treated areas. The result is an important policy lesson concerning the effects of place-based policies at a time of a long-lasting recession, such as that engendered by the Covid-19 crisis.

How much does state aid mitigate employment losses? Local policy effects at a time of economic crisis