Place-Based Policies of the European Union: Contrasts and Similarities to the US Experience

The European place-based policy framework, established through the European Treaties and commanding a current budget of $60-70 billion annually, addresses three fundamental territorial challenges: supporting traditionally lagging regions in their development efforts, assisting contemporary distressed regions (including those facing structural challenges from the energy transition), and managing the challenge of spreading prosperity amid strong agglomeration effects in technological clusters. We analyze the place-based features of EU Cohesion Policy and identify similarities and differences with place-based policies in the United States. While there is evidence of reduced disparities and regional reconversion as a result of place-based policies on both continents, there are also many instances of ongoing stagnation and distress. These limits relate to how well policy is designed with respect to economic geography fundamentals as well as political economy and organizational problems in policy design, implementation, and governance. The paper concludes by drawing general lessons on the design of place-based policies and examines issues that are particularly relevant for Europe. We find that EU policy to enhance long-term convergence has had broadly positive effects, and that the EU is performing better than the US at aiding its distressed regions. The EU is taking a much more forward-looking and comprehensive approach than the US to the place-based effects of climate change and supporting a transition away from fossil fuels. In both continents, there is considerable effort to spread high-tech clusters, regional innovation systems, and high-tech manufacturing that are potential sources of local growth and prosperity. In this area, the EU has significant lags compared to the US but is actively engaged in trying to upgrade its technological performance. Common challenges to successful policy implementation across both continents include excessive complexity, principal-agent problems, and the need for better ways of setting priorities and assessing whether policy can reshape spatial economic fundamentals in a positive and durable manner.