Authors: Anastasia Panori, Dimitrios Athanasopoulos, Yannis Psycharis

Title: Investigating the role of public investments in regional resilience: An analysis of the Greek regions

Abstract

This study aims at providing insights regarding the role of public investments, which have been portrayed to versatile contribute to economy, and therefore fiscal policies, as means for promoting regional resilience. The latter notion expresses the ability of a region to overcome a structural shock, focusing on regional specificities affecting regional developmental trajectories. As there is still no clear evidence regarding regional policies, elements or structures that can be rigidly characterized as factors, we explore the role of fiscal policies implemented through public investments in Greece for a period of 19 years (2000-2018). Τhe notions of resilience and public investments are particularly relevant in the case of Greece, which has experienced significant structural changes during the last decades. Our analysis encompasses data on public investments, capturing both total and their specific components, as an explanatory factor of regional resilience, measured by changes in regional employment rates (quantitative measurements of resilience). Our database includes investment data for projects that could be allocated to the 51 NUTS III prefectures of Greece, financed entirely by national resources as well as co-financed projects and the model has been estimated using pooled OLS, fixed effects and the system-GMM estimators. We choose the NUTS III level for our analysis as it is the main spatial level for designing and implementing regional development policies. As there has been a limited effort towards exploring the ways in which the labor market, a central aspect of resilience, adjusted to this shock and in general few empirical studies have managed to effectively elaborate on the role of public investments for boosting regional resilience, the following analysis builds on these gaps and tries to investigate the ways in which public investments as well as their various components, have affected the evolution of regional employment, enhancing regional sustainability. Therefore we also control for a set of additional factors referring to the regional social, economic and demographic structure, such as specific types of public investments, GDP, political aspects, regional market structure and human capital endowments, population density and population structure, to get a more concrete estimation of the contribution of public investments on regional resilience. The results indicate that total public investments, decentralized and public investments related to tourism and culture, are the ones that have a positive impact on regional resilience. Moreover, the level of development, human capital endowments, population density and shares of population between 0-29 and 50-69, are additional boosting factors for resilience. In contrast, our findings for investments in categories that traditionally considered to positively affect regional growth such as infrastructure investments and investments related to education and R&D were not found statistically significant. Finally there are some mixed results regarding the effect of the primary sector, whilst political power has been significant with a negative impact on resilience only in some cases. In overall evidence suggest that public investments covering the period 2000-2018 have positively affected regions ability to adjust to economic shocks.