Saturation in European Regional Development Fund absorption: evidence from Italian local governments

Abstract The expansion of EU cohesion funding has made absorption capacity a key concern for EU Member States. Italy struggled to fully absorb the allocated funds, spending only 78% of allocated funds during the 2014–2020 programming cycle. This study examines the factors associated with the absorption capacity of Italian local governments for European Regional Development Fund (ERDF) resources during the 2014–2020 programming cycle. Using a panel Tobit model, we identify a significant saturation pattern in the management of the ERDF by Italian local governments. Higher volumes of funding managed in the current or previous programming cycle, as well as the overlap of projects across consecutive programming periods, are associated with lower absorption capacity, suggesting that cumulative administrative workload may constrain fund absorption. Socioeconomic conditions and administrative capacity, particularly in terms of quality and capacity of the local bureaucratic apparatus, fiscal efficiency and the economic performance of local governments, are positively associated with absorption capacity. Finally, the presence of political elections is negatively associated with absorption, highlighting the relevance of electoral cycles for funds implementation.