NextGenerationEU landing: Assessing the territorial allocation of Italy’s Recovery and Resilience Facility funding

In response to the COVID-19 crisis, the European Union introduced NextGenerationEU, its largest stimulus package to date. We focus on Italy, the programme’s largest beneficiary, and analyse the territorial distribution of funds. Although centrally coordinated, most expenditures are awarded through calls and implemented by local governments. {blue}{Using a sample of approximately 4,500 Italian municipalities for which administrative-efficiency measures can be constructed, we estimate a two-stage Heckman selection model to distinguish between realized access to NRRP funding and award intensity conditional on participation.} Results show that funds are disproportionately allocated to Southern, relatively worse-off urban municipalities with stronger administrative capacity and prior experience with EU Cohesion Policy. We then test if, across different policy areas, funds were targeted following specialisation or convergence logics. We find that, across some of the key policy areas, the allocation is reinforcing existing spatial specialisation, i.e. more resources are flowing to territories with pre-existing stronger endowments. {blue}{Relatedly, the results for the Green Revolution and Ecological Transition mission suggest that allocations are more closely associated with selected indicators of territorial vulnerability, such as hydraulic risk, than with local air-pollution intensity.} Finally, we uncover how administrative efficiency and stronger local governance are significant predictors of reduced project delays. Taken together, these findings highlight key allocative trade-offs and the uneven administrative capacity of territories expected to implement the programme.