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Absorptive Capacity and the Growth and Investment Effects of Regional Transfers: A Regression Discontinuity Design with Heterogeneous Treatment Effects

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

Abstract

Researchers often estimate average treatment effects of programs without investigating heterogeneity across units. Yet, individuals, firms, regions, or countries vary in their ability to utilize transfers. We analyze Objective 1 transfers of the EU to regions below a certain income level by way of a regression discontinuity design with systematically varying heterogeneous treatment effects. Only about 30 percent and 21 percent of the regions?those with sufficient human capital and good-enough institutions?are able to turn transfers into faster per capita income growth and per capita investment, respectively. In general, the variance of the treatment effect is much bigger than its mean.

Suggested Citation

  • Sascha O. Becker & Peter H. Egger & Maximilian von Ehrlich, 2013. "Absorptive Capacity and the Growth and Investment Effects of Regional Transfers: A Regression Discontinuity Design with Heterogeneous Treatment Effects," American Economic Journal: Economic Policy, American Economic Association, vol. 5(4), pages 29-77, November.
    • Handle: RePEc:aea:aejpol:v:5:y:2013:i:4:p:29-77
    Note: DOI: 10.1257/pol.5.4.29
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    More about this item

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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