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Going NUTS: The Effect of EU Structural Funds on Regional Performance

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Author Info
Sascha O. Becker ()
Peter Egger ()
Maximilian Von Ehrlich ()
Robert Fenge ()

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Abstract

The European Union (EU) provides grants to disadvantaged regions of member states to allow them to catch up with the EU average. Under the Objective 1 scheme, NUTS2 regions with a GDP per capita level below 75% of the EU average qualify for structural funds transfers from the central EU budget. This rule gives rise to a regression-discontinuity design that exploits the discrete jump in the probability of EU transfer receipt at the 75% threshold. Additional variability arises for smaller regional aggregates - so-called NUTS3 regions - which are nested in a NUTS2 mother region. Whereas some relatively rich NUTS3 regions may receive EU funds because their NUTS2 mother region qualifies, other relatively poor NUTS3 regions may not receive EU funds because their NUTS2 mother region does not qualify. We find positive growth effects of Objective 1 funds, but no employment effects. A simple cost-benefit calculation suggests that Objective 1 transfers are not only effective, but also cost-efficient.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 2495.

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Date of creation: 2008
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Handle: RePEc:ces:ceswps:_2495

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Related research
Keywords: structural funds; regional growth; regression discontinuity design; quasi-randomized experiment;

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Find related papers by JEL classification:
C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
R11 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Analysis of Growth, Development, and Changes

References listed on IDEAS
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  1. Sandy Dall'erba & Julie Le Gallo, 2008. "Regional convergence and the impact of European structural funds over 1989-1999: A spatial econometric analysis," Papers in Regional Science, Blackwell Publishing, vol. 87(2), pages 219-244, 06. [Downloadable!] (restricted)
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  2. Joshua D. Angrist, 1998. "Estimating the Labor Market Impact of Voluntary Military Service Using Social Security Data on Military Applicants," Econometrica, Econometric Society, vol. 66(2), pages 249-288, March.
    Other versions:
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