On the impact of next generation EU funds : a regional synthetic control method approach

The European Union's Next Generation EU (NGEU) program and its implementation through the Recovery and Resilience Facility (RRF) were conceived with the premise of promoting a coordinated fiscal response within the European Union to address the challenges arising from the COVID-19 crisis. The program provides Member States with access to grants and concessional loans aimed at supporting their recovery and resilience plans, which must incorporate coherent packages of reforms and investments. We evaluate the regional economic impact of the NGEU program in Spain, as one of the European countries most affected by the pandemic and, therefore, one of the program's main beneficiaries. To do so, we employ counterfactual techniques, which are particularly useful when considering alternative scenarios, such as the existence or absence of NGEU funds. According to our results, the economic impact led to an increase in GDP per capita in 2022, a perspective that is projected in 2023, 2024, and 2025 compared to a scenario without NGEU funds. This result is robust to various robustness checks. This analysis sheds light on the economic transformations attributable to the implementation of these exceptional measures.