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The role of fiscal transfers for regional economic convergence in Europe

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  • Checherita-Westphal, Cristina
  • Nickel, Christiane
  • Rother, Philipp

Abstract

This paper provides evidence on the role of net fiscal transfers to households and EU structural funds for per-capita output convergence across a large sample of European regions during the period 1995-2005. We find that net fiscal transfers, while achieving regional redistribution, seem to impede output growth and promote an “immiserising convergence”: output growth rates in poor receiving regions decline by less than in rich paying regions. EU structural and cohesion funds spent during 1994-1999 had a positive, but slight, impact on future economic growth, mainly through the human development component. JEL Classification: E62, R11, R23

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Bibliographic Info

Paper provided by European Central Bank in its series Working Paper Series with number 1029.

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Date of creation: Mar 2009
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Handle: RePEc:ecb:ecbwps:20091029

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Keywords: convergence; Fiscal Policy; regional economic growth; regional migration;

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References

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  1. Cappelen, A. & Castellacci, F. & Fagerberg, J. & Verspagen, B., 2002. "The Impact of Regional Support on Growth and Convergence in the European Union," Working Papers 02.14, Eindhoven Center for Innovation Studies.
  2. Quah, Danny T., 1996. "Empirics for economic growth and convergence," European Economic Review, Elsevier, vol. 40(6), pages 1353-1375, June.
  3. Shioji, Etsuro, 2001. " Public Capital and Economic Growth: A Convergence Approach," Journal of Economic Growth, Springer, vol. 6(3), pages 205-27, September.
  4. Gernot Doppelhofer & Ronald I. Miller & Xavier Sala-i-Martin, 2000. "Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (Bace) Approach," OECD Economics Department Working Papers 266, OECD Publishing.
  5. Islam, Nazrul, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 1127-70, November.
  6. Serge Coulombe & Frank C. Lee, 1995. "Convergence across Canadian Provinces, 1961 to 1991," Canadian Journal of Economics, Canadian Economics Association, vol. 28(4a), pages 886-98, November.
  7. Robert J. Barro, 1999. "Inequality, Growth, and Investment," NBER Working Papers 7038, National Bureau of Economic Research, Inc.
  8. Johnson, Paul A., 2000. "A nonparametric analysis of income convergence across the US states," Economics Letters, Elsevier, vol. 69(2), pages 219-223, November.
  9. Sergio Rey & Brett Montouri, 1999. "US Regional Income Convergence: A Spatial Econometric Perspective," Regional Studies, Taylor & Francis Journals, vol. 33(2), pages 143-156.
  10. Manfred Fischer & Peter Stumpner, 2008. "Income distribution dynamics and cross-region convergence in Europe," Journal of Geographical Systems, Springer, vol. 10(2), pages 109-139, June.
  11. Phillip Swagel & Steven Vincent Dunaway & Martin David Kaufman, 2003. "Regional Convergence and the Role of Federal Transfers in Canada," IMF Working Papers 03/97, International Monetary Fund.
  12. Sergio Rebelo, 1999. "Long Run Policy Analysis and Long Run Growth," Levine's Working Paper Archive 2114, David K. Levine.
  13. Sala-i-Martin, Xavier, 1995. "The Classical Approach to Convergence Analysis," CEPR Discussion Papers 1254, C.E.P.R. Discussion Papers.
  14. Robert J. Barro & Xavier Sala-i-Martin, 1990. "Economic Growth and Convergence across The United States," NBER Working Papers 3419, National Bureau of Economic Research, Inc.
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Cited by:
  1. LSE Enterprise, 2011. "Study on the impact of the single market on cohesion: implications for cohesion policy, growth and competitiveness," LSE Research Online Documents on Economics 42840, London School of Economics and Political Science, LSE Library.
  2. Marie-Eve Mulquin & Katja Senger, 2011. "Interregional transfers and economic convergence of regions," S�rie Politique Economique 58, Facult�s Universitaires Notre-Dame de la Paix, Centre de Recherches en Economie R�gionale et Politique Economique.

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