Using financial instruments for regional development policies

This chapter discusses the use of financial instruments to support socially desirable investments by private and public actors in order to promote economic development in cities and regions. While theoretical arguments for the use of financial instruments are generally well defined, revisiting theory can help bridging gaps of their practical use. This chapter thus explores, from a theoretical and practical perspective, advantages and disadvantages of financial instruments, and how to promote their use in more effective ways. It identifies factors that make their use particularly effective when compared to grants and highlights, at the same time, circumstances under which they are less appropriate. Finally, it summarises practical considerations for policy makers to make the most of financial instruments.