Mission‐Led and Place‐Based Policy Outcomes in European Regions

Abstract

European industrial policy relies on two major programmes operating under different logics: the place‐based Cohesion Policy, which directs investment towards less developed regions to reduce territorial disparities, and the mission‐led Horizon 2020, which allocates funding competitively to promote research and innovation. Using the RHOMOLO spatial dynamic computable general equilibrium model calibrated for all 235 European Union (EU) Nomenclature of Territorial Units for Statistics‐2 regions, we first examine the macroeconomic impact of each policy as actually implemented and then compare place‐based and mission‐led approaches under a normalised framework that holds total funds constant, isolating the role of policy design from that of fund volumes. Mission‐led allocations generate higher long‐run GDP returns but increase regional inequality and yield lower employment gains, whilst place‐based allocations reduce disparities and support substantially more employment. These results are driven primarily by the territorial distribution of funds, with direct implications for the design of EU industrial policy amid the ongoing reform of Cohesion Policy.