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Does EU cohesion policy work? Theory and evidence

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  • Davide Fiaschi
  • Andrea Mario Lavezzi
  • Angela Parenti

Abstract

This paper evaluates the effectiveness of European Cohesion Policy in the regions of 12 EU countries in the period 1991–2008, on the basis of a spatial growth model, which allows for the identification of both direct and indirect effects of EU funds on GDP per worker growth. We find that “Objective 1†funds are characterized by strong spatial externalities and a positive and concave effect on the growth of GDP per worker, which reaches a peak at the ratio funds/GDP of approximately 3 percent and becomes non†significant after 4 percent. “Objective 2†and “Cohesion†funds have nonsignificant effects, while all the other funds exert a positive and significant effect, but their size is very limited. EU Cohesion Policy, moreover, appears to have increased its effectiveness over time. In the period 2000–2006 Objective 1 funds are estimated to have a median multiplier equal to 1.52, and to have added 0.37 percent to the GDP per worker growth. Overall, in the period 1991–2008, funds are estimated to have added 1.4 percent to the median annual growth, and to have reduced regional disparities of 8 basis points in terms of the Gini index.

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  • Davide Fiaschi & Andrea Mario Lavezzi & Angela Parenti, 2018. "Does EU cohesion policy work? Theory and evidence," Journal of Regional Science, Wiley Blackwell, vol. 58(2), pages 386-423, March.
  • Handle: RePEc:bla:jregsc:v:58:y:2018:i:2:p:386-423
    DOI: 10.1111/jors.12364
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    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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