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The role of fiscal transfers for regional economic convergence in Europe

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Author Info
Cristina Checherita () (George Mason University, School of Public Policy, 3401 Fairfax Drive, MS 3B1, Arlington, VA 22201, USA.)
Christiane Nickel () (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.)
Philipp Rother () (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.)
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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Paper provided by European Central Bank in its series Working Paper Series with number 1029.

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Length: 43 pages
Date of creation: Mar 2009
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Handle: RePEc:ecb:ecbwps:20091029

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Keywords: Fiscal policy; convergence; regional economic growth; regional migration.;

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