Governments in industrialised countries often resort to direct interventions to alter the structure of the economy and correct market failures. Existing literature in economics has found theoretical and empirical evidence both against and for the case of such policies (Pack and Saggi, 2006). On the other hand, political scientists and economists have often been concerned about the tactical distribution of public funds (Besley and Case, 1995). In this thesis I link these two literatures by using novel datasets and quasi-experimental quantitative methods to understand how public funds may be actually distributed in practice. In the first two chapters I study the allocation mechanisms of Cassa del Mezzogiorno (CasMez), a large placed-based policy targeted at the Italian southern regions from early 1950s to the 1990s. While anecdotal evidence often refers to CasMez as a policy extremely exposed to clientelistic pressures, no quantitative evidence has been provided yet. I reconstruct, to my knowledge for the first time, the allocation of CasMez at the micro level and investigate the mechanisms behind it. In Chapter 1, I study the political determinants of the allocation of resources in the first years of CasMez activity. By looking at close electoral races in the local elections of 1951-52, I employ a Regression Discontinuity Design (RDD) to test whether alignment of municipalities with the central government had an effect on the distribution of funds at the local level in the years subsequent to the elections. The results show that the central government used CasMez funds to swing marginal municipalities away from the opposition in rural areas which the government considered as at political risk because of their exposure to peasant strikes and land invasions. In Chapter 2, I study the economic determinants of CasMez over its 40 years of operations. To identify the causal effect of local economic shocks on the allocation of funds, I construct a shift-share instrument and predict local economic growth rate with the weighted average of aggregate industry-level growth rates, wherein weights are derived from the local industry structure in the baseline period. I find that CasMez often responded to local economic shocks by making larger investments in areas that had been growing faster and had better growth prospects. In Chapter 3, I shift the attention to the impact of one of the most common and least controversial government interventions - support to Research and Development (R&D) investments. By using balance sheet and patenting data, I investigate the effect of an R&D programme targeted at Italian high-tech start-ups. Special features of the programme allow me to consider the allocation of the subsidy as quasi- random and implement an RDD based on cut-off scores assigned by an independent committee to the firms. The results suggest that the subsidy did not increase patent applications and only had a short-run effect on investments in intangible assets.