Description:
<jats:title>Abstract</jats:title><jats:p>This paper investigates how the overall impact of the European Cohesion Policy depends on the composition of the regional investment in <jats:italic>Hard</jats:italic> (infrastructure) and <jats:italic>Soft</jats:italic> (business and technical support) projects. The study employs a generalized propensity score (GPS) analysis in a multidimensional treatment context. In particular, the two dimensions considered are given by the <jats:italic>Hard</jats:italic> and <jats:italic>Soft</jats:italic> investments. The GPS estimation is based on a set of relevant idiosyncratic features of the regions. The second step estimates a dose–response function in a two‐dimensional setting. The results confirm the existence of nonlinearities in the effect of different amounts of funds, but more importantly, show a degree of complementarity between <jats:italic>Hard</jats:italic> and <jats:italic>Soft</jats:italic> investment and that for policymakers, it is crucial to exploit such features to achieve more significant impact. The EU's more developed regions could have achieved a doubled GDP p.c. growth rate by pursuing a policy mix where <jats:italic>Hard</jats:italic> investments are reduced in favor of <jats:italic>Soft</jats:italic> investments. This improvement is comparable to the one obtained by at least doubling the available resources. The findings add to the evidence collected on the impact of the Cohesion Policy, suggesting a shift of the debate from the quantity to the quality of the expenditure pursued under the umbrella of territorial policies.</jats:p>