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on European Economics |
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Issue of 2026–10–12
twenty papers chosen by Simon Sosvilla-Rivero, Instituto Complutense de Análisis Económico |
| By: | Christl, Michael |
| Abstract: | Value-added tax (VAT) systems in EU Member States deviate substantially from a uniform-rate benchmark through reduced rates and exemptions, typically motivated by distributional concerns. This paper provides microsimulation evidence on the fiscal and distributional effects of the full set of VAT expenditures, including both reduced rates and the non-actionable exemption gap covering healthcare, education and financial services mandated by the EU VAT Directive, in five major EU economies (Germany, France, Italy, Spain and Poland) under the 2024 policy baseline. Using EUROMOD and its Indirect Tax Tool with EU-SILC 2022 microdata matched with EU-HBS 2015 expenditure data, and following a compensating variation welfare approach, we simulate a universal standard-rate VAT counterfactual and find that abolishing all VAT expenditures would reduce post-consumption-tax disposable income by 9-21% for bottom-decile households versus 3-5% for the top decile, with Italy and Spain displaying the most regressive reform-cost profiles. The difference in welfare loss between the bottom and top income deciles ranges from -6.3 percentage points in Poland to -16.3 percentage points in Italy. While VAT expenditures offer meaningful purchasing-power protection to lower-income households in proportional terms, this protection is poorly targeted in absolute terms because richer households capture a larger share of the implicit subsidy in absolute cash terms, and could be replicated more efficiently through targeted income transfers. We discuss implications for revenue-neutral VAT reform and the efficiency-equity trade-off in EU indirect taxation. |
| Keywords: | value-added tax, VAT expenditures, reduced rates, exemptions, income inequality, microsimulation, EUROMOD, indirect taxation, European Union |
| JEL: | H23 H25 D31 C15 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1828 |
| By: | Garcia Rodriguez Abian (European Commission - JRC); Christou Tryfonas (European Commission - JRC); Giffoni Francesco; Lazarou Nicholas Joseph (European Commission - JRC); Mitra Alessio; Pedralli Matteo; Peralta Catarina (European Commission - JRC); Salotti Simone (European Commission - JRC) |
| Abstract: | This paper presents an ex ante macroeconomic impact assessment of the European Innovation Act (EIA), a regulatory reform package to be adopted in 2026 aimed at closing Europe's structural gap between high-quality research and its commercialisation. Unlike traditional EU investment programmes, the EIA addresses regulatory bottlenecks through three targeted measures tackling weak IP exploitation and the underuse of R&D procurement as a tool for innovation. Micro-level cost-benefit estimates are mapped into RHOMOLO, the European Commission's spatial dynamic CGE model covering 235 NUTS-2 regions. Four core channels are simulated over a ten-year horizon: private investment with productivity impacts, pure total factor productivity (TFP) gains, minor public expenditure increases, and net costs or savings modelled as lump-sum transfers. The simulation results suggest that the EIA could generate between EUR 256 billion and EUR 452 billion in additional EU GDP cumulatively over ten years, creating between 238 and 507 thousand jobs at peak impact in year 10, when GDP would be between 0.24% and 0.42% above the no-policy scenario. Investment and productivity channels dominate supply-side effects, leading to persistent positive effects on the economy, demonstrating substantial macroeconomic returns from the regulatory innovation framework under analysis. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:termod:2020605 |
| By: | Anabela Santos; Andrea Conte |
| Abstract: | Using a newly compiled dataset at NUTS2 level, this working paper provides a mid-term analysis ofthe territorial and sectoral distribution of the two main EU R&I funding instruments, HorizonEurope and Cohesion Policy, over the first five years of implementation of the 2021-2027programming period. The two instruments follow distinct but complementary logics: excellencebasedand territorial convergence, respectively. The findings show substantial territorial differencesin the importance of EU R&I funding. In many Central, Eastern and Southern European regions, the combined contribution of Cohesion Policy and Horizon Europe exceeds 20% of total R&Dexpenditure, making EU funding a major source of R&D financing, particularly in less developedand innovative regions. Horizon Europe is highly concentrated among innovation-leading regions, while less innovative regions rely more on R&I Cohesion Policy funding. The sectoral analysis showsthat Horizon Europe is predominantly oriented towards the higher education sector, whereasCohesion Policy has a stronger contribution to the business sector, which becomes relatively moreimportant as regional innovation performance declines. The differentiated territorial and sectoralroles of Horizon Europe and Cohesion Policy observed in previous programming periods tend topersist during the first five years of the current EU funding architecture, highlighting the importanceof maintaining their complementary roles while strengthening links between competitive and placebasedR&I support. |
| Keywords: | R&I funding; Horizon Europe; Cohesion Policy; EU regions |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:ict:wpaper:2013/414367 |
| By: | Olivier De Jonghe (European Central Bank; National Bank of Belgium); KonstantÄ«ns Beņkovskis (Latvijas Banka); Karolis Bielskis (Lietuvos Bankas); Diana Bonfim (Banco de Portugal; Católica Lisbon); Margherita Bottero (Banca d’Italia); Tamás Briglevics (Central Bank of Hungary); Martin Cesnak (National Bank of Slovakia); Mantas Dirma (Lietuvos Bankas); Marina Emiris (National Bank of Belgium); Pálma Filep-Mosberger (Central Bank of Hungary); Valentin Jouvanceau (Lietuvos Bankas); Nicholas Kaiser (Central Bank of Ireland); Dmitry Khametshin (Banco de España); Tibor Lalinsky (National Bank of Slovakia); Viola M. Grolmusz (Central Bank of Hungary); Laura Moretti (Central Bank of Ireland); ArtÅ«rs JÄ nis Å…ikitins (Latvijas Banka); Angelo Nunnari (Banca d’Italia); Maria Rodriguez-Moreno (Banco de España); Elitsa Stefanova (European Central Bank); Lajos Tamás Szabó (Central Bank of Hungary); KÄ rlis Vilerts (Latvijas Banka); Sujiao Emma Zhao (Banco de Portugal) |
| Abstract: | We study heterogeneity in households’ credit across nine European countries (Belgium, Spain, Hungary, Ireland, Italy, Latvia, Lithuania, Portugal, and Slovakia) during 2022-2024 using granular credit register data. We first document substantial between- and within-country variation in mortgage and consumer lending by borrower age, loan maturity, and interest rate fixation. We then quantify the pass-through of the ECB’s recent tightening cycle to household borrowing costs and assess its heterogeneous impact across households. Pass-through is nearly complete for mortgages (around 0.9) but considerably weaker for consumer credit (around 0.4). While mortgage pass-through is relatively homogeneous across countries, consumer credit shows pronounced cross-country differences that cannot be explained by borrower or loan characteristics. Younger households face stronger mortgage pass-through but weaker consumer credit pass-through relative to older borrowers, and longer maturities are associated with stronger pass-through in both credit markets. |
| Keywords: | monetary policy transmission; household borrowing; credit registers; interest rate pass-through; cross-country heterogeneity |
| JEL: | E52 G21 D14 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:mnb:wpaper:2026/1 |
| By: | Krustev, Georgi |
| Abstract: | Leveraging the unique setting of unilateral euroisation, this paper examines the spillover effects of euro area monetary policy on Montenegro and Kosovo. Through the lens of a structural VAR model with block exogeneity, it shows that euro area monetary policy shocks can significantly influence output and inflation in these economies, albeit with a delayed response, while contributing only modestly to their overall business cycle fluctuations. JEL Classification: C11, C32, E52 |
| Keywords: | block exogeneity, monetary transmission, structural VAR |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263293 |
| By: | García, Juan Angel; Gimeno, Ricardo; Hinds, Piers; Su, Haozhe; Tretyakov, Michael V. |
| Abstract: | This paper investigates the information content of the term structure of inflation risks and its usefulness for understanding inflation dynamics. Using prices of traded zero-coupon inflation caps and floors, we develop a robust non-parametric methodology, combined with a Student’s t-copula, to estimate spot and forward risk-neutral densities at short-, medium-, and long-term horizons, i.e., long-horizon risks are identified from liquid instruments alone, at daily frequency, without forward-starting contracts. Focusing on the euro area over 2009-2026, we show that the term structure of inflation risks provides valuable information about the persistence of inflation shocks and the degree to which changes in the inflation outlook become embedded at longer horizons. We also show that there is marked heterogeneity in the macroeconomic and financial conditions associated to inflation risks across horizons: short- and medium-term risks are mainly associated with current inflation, confidence indicators, commodity prices, and near-term macroeconomic risks, whereas long-term risks are more strongly related to monetary and financial conditions. These findings highlight the importance of analysing the entire term structure of inflation risks rather than relying on a single maturity. JEL Classification: G13, E31, E44 |
| Keywords: | financial conditions, inflation compensation, inflation risks, option prices, risk-neutral densities |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263294 |
| By: | König, Pascal; Leidorf-Tidå, B.J.A. |
| Abstract: | This article examines EU citizens’ support for EU policy to attain digital sovereignty regarding Artificial intelligence (AI). Promoting domestic industries in AI is crucially important for attaining AI sovereignty. Yet, AI sovereignty policy ultimately hinges on support by the European public, and protective policy intervening in the EU AI market may be felt directly – and negatively – by citizens. Using survey data from Lithuania, the Netherlands, Romania, and Sweden, we examine how much citizens support AI sovereignty policy even if this comes with costs and study how political and AI attitudes are associated with this trade-off evaluation. The analysis shows that EU-centrism is positively associated with support for AI sovereignty policy whereas positive attitudes toward AI and higher trust in US and Chinese tech companies show negative associations. The results have important consequences for the EU’s possibilities to garner public support for an AI sovereignty policy agenda. |
| Date: | 2026–10–02 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:263yj_v1 |
| By: | Silvia Iossa; Saverio Barabuffi |
| Abstract: | This study examines whether universities shape the regional innovation effects of public R&D expenditure and whether this role varies across regional development trajectories. We analyse a panel of 1166 EU NUTS 3 regions over the period 2007-2020, combining data on European public R&D funding, patenting performance, university presence and regional development traps. Toa ddress the endogeneity of public R&D expenditure, we employ a control function aproach. The results show that public r&D expendirue positively affects patenting performance in both university and non-university, but the difference between them is not statistically significant. University presence therefore does not sistematically amplify the returns to public R&D. However, its moderating role becomes more pronounced in regions exposed to development trap risk and in regions experiencing persistent stagnation, while evidence is weaker for trap intensity. These fundings suggest that universities act as contingent rather than unviersal catalyst of public R&D. Their contribution appears particularly relevant in vulnerable and persistently stagnant regional trajectories, but less able to offset sever structural constraints. The study contributes to debates on the geography of public R&D and regional development traps by showing that the effectiveness of research funding depends not only on institutional presence, bu also on the development rajectory in which that institutional capacity is embedded. |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2610.08004 |
| By: | Głodek Paweł; Dadas Grzegorz; Compano Ramon (European Commission - JRC) |
| Abstract: | This report proposes a consistent and robust methodology for identifying and comparing university spin-offs across European countries. The conceptual framework relies on observable ownership links, notably equity-based, between universities and spin-offs. The methodology was tested in Poland, Czechia, and Slovakia, countries with diverse legal and organisational contexts. The methodology has proven to compare university spin-off across the European Union irrespective of the national laws for academia to spin-off their ventures. A comparison the three case studies reveal that the number of spinoffs created is lower than expected with regard to the country’s R&D capacity and scientific output, manifesting a considerable untaped potential for innovative startups in Poland, the Czech Republic and Slovakia. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc147605 |
| By: | Heta Pöyliö |
| Abstract: | Social protection systems are considered the cornerstones of the welfare state, originally built to address inequalities, alleviate poverty, and mitigate social risks. Many European social protection systems have evolved into complex, multi-tiered 'puzzles' as they expand coverage to address new life-course risks. This has created systems in which navigating is a skill and access is unequal. This paper uses a recipiency-based approach to analyse the level of benefit complexity of European social protection systems, 'the puzzle', by counting how many different types of social cash benefits households receive in one year. A higher number reflects greater complexity of the income protection system. Using microdata from the Luxembourg Income Study across 25 European countries for the years 2000-2023, the results show that households, particularly families, can receive up to 15 different benefits as part of their annual income, although there is significant variation across countries and households. Benefit complexity has increased in some countries, whereas it has been relatively stable in others. The increase in benefit complexity is associated with higher access to benefits in Southern Europe across all household types, whereas in the Nordic countries, the rise in single-parent benefit complexity aligns with growing single-parent poverty rates. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:lis:liswps:922 |
| By: | Korneliusz Pylak (Lublin University of Technology, Lublin, Poland); Michael Fritsch (Friedrich Schiller University Jena, Germany); Michael Wyrwich (University of Groningen, The Netherlands, and Friedrich Schiller University Jena, Germany) |
| Abstract: | This study examines the dynamics of regional innovation activity in Europe from 2000 to 2020 using patent applications. Standard convergence measures indicate that regional disparities are narrowing, with initially lagging regions catching up to the leading ones. Our analysis reveals two persistent ‘clubs’: the ‘lagging’ and the ‘advanced’ regions. Although these groups are becoming increasingly similar, the differences between them remain largely unchanged. Despite two decades of growth, the disparity between the two clubs still accounts for a great deal of the total variation in regional patenting. These patterns suggest a convergence illusion that is overlooked in the current scholarly debate. |
| Keywords: | regional innovation, convergence, convergence clubs, European regions |
| JEL: | O31 R11 O47 |
| Date: | 2026–09–28 |
| URL: | https://d.repec.org/n?u=RePEc:jrp:jrpwrp:2026-011 |
| By: | Trine Schack; Jordy Meekes; César Barreto; Stéphane Carcillo; Jonas Fluchtmann; Alexander Hijzen; Benjamin Lochner; Matthew Nibloe; Rune Vejlin |
| Abstract: | We study the incidence, sources, and dynamics of low-wage employment using harmonised linked employer-employee administrative data from Denmark, France, Germany, the Netherlands, Portugal, and the United Kingdom. We define low-wage employment relative to the country-specific median hourly wage and examine how worker characteristics, firm-specific wage premia, wage progression, and labour market institutions shape outcomes at different parts of the lower wage distribution. Three main findings emerge. First, worker characteristics account for most of the wage gap facing low-wage workers, though firm-specific wage premia matter too, especially at the very bottom, where they are around half as large as the worker component. These firm premia reflect both sorting across industries and pay differences across firms within industries. Second, low-wage employment is at least partly transitory, as workers at the bottom see faster subsequent wage growth and change firms more often. Third, minimum wages and marginal effective tax rates show limited systematic association with wage growth or job-to-job mobility, though higher minimum wages are linked to a smaller share of workers below 70% of the median. These patterns are broadly similar across countries and point to the joint importance of worker skills and access to higher-paying firms for improving low-wage workers' prospects. |
| Keywords: | low-wage employment, cross-country, matched employer-employee data, wage premia, taxes |
| JEL: | J24 J31 J38 J62 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:26237 |
| By: | Sami Diaf |
| Abstract: | Price stability remains a pillar in monetary policy practices and carries a special importance within monetary unions. Mainstream economics tried to leverage price stability using price indices and several metrics to shed light on specific dynamics and optimal macroeconomic levels. The wide availability of data led researchers to consider the study of systems using Random Matrix Theory, based on inner correlation patterns. This aims to enhance the multivariate analysis by removing noisy patterns from the signal and improve data quality for further inferences. This work considers the collection of monthly inflation indices in the Eurozone as a \textit{system} of prices to analyze its eigenvalues' statistical and asymptotic properties and uncover inner country-level insights. Results confirm the system cannot assumed to be randomly generated, and the data exhibit noise-dominated patterns, due to small and persistent variations at the country-level. The latter make the inter-country correlations more dynamic and the separation of the signal from the noise quiet difficult. Findings identified two countries as distorting inflation dynamics besides three other distinct, regional-based groups of countries. Variability sources might stem from economic episodes fueling inflation spikes in some countries, as well as methodological aspects used to ensure data quality and representativeness in the European Union. Despite being complex, the system demonstrates a certain stability, in terms of self-organization; while large monthly fluctuations cannot be considered as rare events, but part of the data-generating process. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.35011 |
| By: | Samuel Drößler; Ulrich Fritsche; Junbo Huang; Max Weinig |
| Abstract: | This paper investigates how households conceptualize inflation and how these qualitative narratives correlate with inflation expectations and policy preferences. Using a representative survey of over 4, 000 German households, we elicit open-ended narratives regarding the 2022–2023 inflation surge and represent them as directed acyclic graphs (DAGs) via fine-tuned large language models. We find that German households overwhelmingly interpret the inflation episode through supply-side channels and the war in Ukraine, while demand-side explanations remain comparatively rare. Beyond these aggregate patterns, inflation narratives systematically vary by financial literacy, personal economic experience, and institutional trust. Narrative structure and content correlate with inflation beliefs: supply-side narratives are associated with lower inflation expectations, whereas narratives emphasizing government action or corporate price gouging correspond to higher expectations and lower target inflation rates. A preregistered randomized information provision experiment using real-world newspaper excerpts demonstrates that exposure to news narratives significantly impacts qualitative inflation expectations, whereas quantitative expectations display greater rigidity. However, narrative exposure significantly reduces reliance on prior inflation perceptions, with treatment effects exhibiting mild heterogeneity across levels of financial literacy and prior inflation experience. |
| Keywords: | . |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:gwc:wpaper:2026-014 |
| By: | Michael Pfarrhofer; Anna Stelzer |
| Abstract: | We answer the question posed in the title with a nonlinear mixed-frequency vector autoregression, estimated with Bayesian additive regression trees. The model combines monthly macro-financial variables with quarterly bank lending survey data, and identifies the dynamic responses from high-frequency policy surprises. Sign asymmetry dominates; a tightening produces monetary policy transmission mostly in line with the theoretical predictions, whereas easing of any size produces mostly insignificant responses. Peak effects vary with initial conditions, while several common, predefined regime splits do not yield considerable differences in the propagation of the shocks. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.37168 |
| By: | Belloc, Ignacio (University of Zaragoza); Molina, José Alberto (University of Zaragoza); Velilla, Jorge (University of Zaragoza) |
| Abstract: | This paper examines the transmission of labor and non-labor income to household consumption. To do so, we develop a dynamic model of collective household behavior, and estimate consumption Euler equations using cross-country data from the EU-SILC for 11 European countries over 2006–2019. Results indicate different consumption dynamics depending on the source of the income and the identity of the recipient, which reflects separate preferences over goods among husbands and wives. The household economic environment affects consumption with persistence, as predicted by models with limited commitment. We find small consumption responses to non-labor incomes, which tend to be transitory and infrequent payments. The results also suggest that women are more risk averse, as the consumption response to wife wages is smaller than the response to husband wages. These findings contribute to the literature on consumption dynamics by providing harmonized cross-country evidence for Europe. |
| Keywords: | dynamic collective model, limited commitment, consumption, wages, income, EU-SILC |
| JEL: | D12 D13 D15 D31 E21 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18982 |
| By: | Beáta Horváth (Magyar Nemzeti Bank (Central Bank of Hungary)); Tamás Berki (Magyar Nemzeti Bank (Central Bank of Hungary)); Lívia Réka Ónozó (Magyar Nemzeti Bank (Central Bank of Hungary)); Csanád Temesvári (Magyar Nemzeti Bank (Central Bank of Hungary)) |
| Abstract: | This paper proposes a sentiment-based financial stress indicator for Hungary based on occurrence of financial crisis related terms and explores its relationship with macrofinancial variables related to financial uncertainty. Sentiment analysis was conducted on textual data from two major Hungarian news portals covering the period from 2005 to 2020. The terms used in the analysis carry negative connotations, making them suitable for capturing financial instability and stress. The index successfully identifies stress periods that are not adequately reflected by other available sentiment indices related to Hungary. Overall, we propose a novel type of index that enables timely, even real-time monitoring of financial stress situation in Hungary across different time frequencies. |
| Keywords: | sentiment; financial stress; text analysis |
| JEL: | C32 E44 G01 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:mnb:wpaper:2026/3 |
| By: | Batista E Silva Filipe (European Commission - JRC); Joossens Elisabeth (European Commission - JRC); Barranco Ricardo; Curtale Riccardo (European Commission - JRC); Balouktsi Despoina (European Commission - JRC); Bellia Mario (European Commission - JRC); Vasicek Borek; Martins Vitor; Zeugner Stefan; Bazzani Elisa (European Commission - JRC) |
| Abstract: | The Affordable Housing Act (AHA) is a key Commission initiative aiming to enable proportionate measures to address supply and demand mismatches in areas under housing stress. Within this framework, the AHA seeks to establish a common framework for flagging areas potentially under housing stress, clarify the conditions under which targeted and proportionate measures concerning the non-primary use of housing, including short-term rentals, may be justified, and encourage supply-side responses to increase the availability of affordable and social housing. After a thorough assessment of the availability and relevance of data and indicators, the JRC, in coordination with several Commission services, proposed a two-tier approach based on objective and publicly available data to assess areas under housing stress. The first tier combines data on price (Mapadomo) and income (Eurostat) to pre-screen overall housing stress conditions, and can be implemented in a straightforward and consistent manner by competent authorities across all EU Member States. The second tier relies on additional, auxiliary indicators linking to the root causes of the supply-demand mismatches at local level to justify and guide proportional policy development. This visual factsheet summarizes the overall approach, illustrating with recent data at the NUTS3-level how housing stress varies across the EU. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc147616 |
| By: | Michael Fritsch (Friedrich Schiller University Jena, Germany); Michael Wyrwich (University of Groningen, The Netherlands, and Friedrich Schiller University Jena, Germany) |
| Abstract: | We examine the long-term relationship between historical levels of self-employment and economic performance in different regions of Germany. A particular distinction is made between West Germany and the eastern part of the country, that came after WWII for forty years under socialist regime. Regional self-employment rates exhibit high correlation over time periods exceeding a century. In West Germany, high and increasing levels of self-employment are significantly associated with high current levels of Gross Domestic Product (GDP) per population, despite several major historical shocks. That such a relationship cannot be found in East Germany could be a legacy of the socialist period where the government performed anti-entrepreneurial policies. We also find a positive relationship between historical self-employment and patenting in both parts of the country. This relationship is, however, somewhat weaker in East Germany, which experienced considerably more historical shocks than West Germany. |
| Keywords: | Entrepreneurship, self-employment, regional prosperity, patenting, long-term effects |
| JEL: | L26 R11 O52 |
| Date: | 2026–09–28 |
| URL: | https://d.repec.org/n?u=RePEc:jrp:jrpwrp:2026-010 |
| By: | Stefano Blando |
| Abstract: | Before a flood, governments decide where to invest in protection; after it, how much of the loss to compensate. The European Union informs the first decision with a composite index that ranks every subnational unit by vulnerability. This paper tests the ranking by comparing Italian provinces struck by the same flood between 2005 and 2024. The published index does not order provinces by the losses they suffer, with or without controls for hazard, exposure and income ($\rho$ between -0.06 and 0.09). The failure lies in what it weights. As published, the index mostly measures economic development, while losses follow water: they arrive in recurring groups of provinces that share a river basin, and more than half of the ranking error lies between those groups. In a pre-registered test that rebuilds it and eight rivals at every forecast origin from 2010 to 2020, the index comes last on both questions an allocator asks. On where damage will land, its top ten provinces capture 16 per cent of later damage, less than a random draw; Italy's public flood hazard map, blind to losses, captures 44. On who loses more from the same water, its rank correlation with later losses is 0.03; its own components, reweighted on past losses, reach 0.42. Neither repair needs new data. The misranked loss is paid locally. Of EUR 12.3 billion recorded over 2013-2022, 85 per cent was not covered by national transfers, and prevention funding, scored the same way, does no better than chance. Because correlated losses cluster within borders, national pools in Europe need 39 per cent more reserve than cross-border pools of the same size. The index fails the same way across 1, 142 European units, where the repairs are weaker. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.36349 |