The paper examines issues related to the employment effects of financial investmentincentives
provided to SMEs in a lagging rural area in Southern Europe. A regional
SAM is built to portray the structural characteristics of the local economy, followed by
the estimation of regional economic impacts, distinguished into investment- and capacity-
adjustment effects. Results indicate a moderate impact on regional employment, but
capacity-adjustment effects seem substantial. Policy effectiveness is moderate when
only jobs created on site are considered. However, if economy-wide jobs created are
considered, gross cost per job is significantly lower, this consisting a more comprehensive
measure for policy makers.