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Too much of a good thing? On the growth effects of the EU's regional policy

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  • Becker, Sascha O.
  • Egger, Peter
  • von Ehrlich, Maximilian

Abstract

The European Union (EU) provides grants to disadvantaged regions of member states from two pools, the Structural Funds and the Cohesion Fund. The main goal of the associated transfers is to facilitate convergence of poor regions (in terms of per-capita income) to the EU average. We use data at the NUTS3 level from the last two EU budgetary periods (1994-99 and 2000-06). Using generalized propensity score estimation, we analyze to which extent the goal of fostering growth in the target regions was achieved with the funds provided and whether more transfers generated stronger growth effects or not. We find that, overall, EU transfers enable faster growth in the recipient regions as intended, but we estimate that in 36% of the recipient regions the transfer intensity exceeds the aggregate efficiency maximizing level and in 18% percent of the regions a reduction of transfers would not even reduce their growth. We conclude that some reallocation of the funds across target regions would lead to higher aggregate growth in the EU and could generate even faster convergence than the current scheme does.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8043.

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Date of creation: Oct 2010
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Handle: RePEc:cpr:ceprdp:8043

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Keywords: EU regional policy; Generalized propensity score estimation; Quasi-randomized experiment; Regional growth;

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References

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  1. Mohl, Philipp & Hagen, Tobias, 2008. "Which is the Right Dose of EU Cohesion Policy for Economic Growth?," ZEW Discussion Papers 08-104, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  2. Murphy, Kevin M. & Shleifer, Andrei & Vishny, Robert W., 1989. "Industrialization and the Big Push," Scholarly Articles 3606235, Harvard University Department of Economics.
  3. Kosuke Imai & David A. van Dyk, 2004. "Causal Inference With General Treatment Regimes: Generalizing the Propensity Score," Journal of the American Statistical Association, American Statistical Association, vol. 99, pages 854-866, January.
  4. Widgrén, Mika, 2008. "The Impact of Council Voting Rules on EU Decision-Making," Discussion Papers 1162, The Research Institute of the Finnish Economy.
  5. Becker Sascha O & Muendler Marc-Andreas, 2008. "The Effect of FDI on Job Security," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 1-46, April.
  6. Becker, Sascha & Egger, Peter H & Fenge, Robert & von, Ehrlich Maximilian, 2008. "Going NUTS: The Effect of EU Structural Funds on Regional Performance," Stirling Economics Discussion Papers 2008-27, University of Stirling, Division of Economics.
  7. Heckman, James J & Ichimura, Hidehiko & Todd, Petra E, 1997. "Matching as an Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Wiley Blackwell, vol. 64(4), pages 605-54, October.
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  9. Martin, Philippe, 1999. "Public policies, regional inequalities and growth," Journal of Public Economics, Elsevier, vol. 73(1), pages 85-105, July.
  10. Author-Name: Jeffrey D. Sachs & John W. McArthur & Guido Schmidt-Traub & Margaret Kruk & Chandrika Bahadur & Michael Faye & Gordon McCord, 2004. "Ending Africa's Poverty Trap," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 35(1), pages 117-240.
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Citations

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Cited by:
  1. Pierluigi Montalbano & Silvia Nenci & Emiliano Magrini, 2014. "Are the EU trade preferences really effective? A generalized propensity score evaluation of the Southern Mediterranea countries’ case in Agriculture and Fishery," Departmental Working Papers of Economics - University 'Roma Tre' 0188, Department of Economics - University Roma Tre.
  2. Augusto Cerqua & Guido Pellegrini, 2014. "Beyond the SUTVA: how policy evaluations change when we allow for interactions among firms," Working Papers 2/14, Sapienza University of Rome, DISS.
  3. Vinko Mu?tra & Lena Male?eviæ Peroviæ & Silvia Golem, 2013. "Social attitudes and regional inequalities," ERSA conference papers ersa13p678, European Regional Science Association.
  4. Cheng-te Lee & Chen Fang & Kuo-hsing Kuo, 2014. "Common Market and Equilibrium Growth," Economics Bulletin, AccessEcon, vol. 34(1), pages 480-493.
  5. Peter Egger & Maximilian Von Ehrlich & Douglas R. Nelson, 2011. "Migration and Trade," CESifo Working Paper Series 3467, CESifo Group Munich.
  6. Benjamin Furlan & Harald Oberhofer & Hannes Winner, 2014. "A Note on Merger and Acquisition Evaluation," WIFO Working Papers 462, WIFO.
  7. d'Artis Kancs & Boriss Siliverstovs, 2012. "R&D and Non-Linear Productivity Growth of Heterogeneous Firms," JRC-IPTS Working Papers on Corporate R&D and Innovation 2012-06, Institute of Prospective Technological Studies, Joint Research Centre.
  8. Commission of Experts for Research and Innovation (EFI), Berlin (ed.), 2013. "Research, innovation and technological performance in Germany - EFI Report 2013," Research, innovation and technological performance in Germany: Report, Expertenkommission Forschung und Innovation (EFI), volume 127, number 2013e, November.
  9. Philipp Breidenbach & Timo Mitze & Christoph Schmidt, 2011. "Evaluating EU Regional Policy: Many Empirical Specifications, One (Unpleasant) Result," ERSA conference papers ersa11p1144, European Regional Science Association.
  10. Olper, Alessandro & Raimondi, Valentina & Cavicchioli, Daniele & Vigani, Mauro, 2013. "Does Common Agricultural Policy Reduce Farm Labor Migration? A Panel Data Analysis Across EU Regions," Proceedings Issues, 2013: Productivity and Its Impacts on Global Trade, June 2-4, 2013. Seville, Spain 152326, International Agricultural Trade Research Consortium.
  11. David Neumark & Helen Simpson, 2014. "Place-Based Policies," NBER Working Papers 20049, National Bureau of Economic Research, Inc.
  12. Olper, Alessandro & Raimondi, Valentina & Cavicchioli, Daniele & Vigani, Mauro, . "Reallocation of Agricultural Labor and Farm Subsidies: Evidence From the EU Regions," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126645, International Association of Agricultural Economists.
  13. Agnieszka Gehringer & Inmaculada Martinez-Zarzoso & Felicitas Nowak.Lehmann Danziger, 2013. "The Determinants of Total Factor Productivity in the EU: Insights from Sectoral Data and Common Dynamic Processes," EcoMod2013 5343, EcoMod.

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