Contributions to EU regional policy - Reconsidering theoretical and empirical perspectives on the Structural Funds

This cumulative dissertation contains four self-contained articles which are related to EU regional policy and its structural funds as the overall research topic. In particular, the thesis addresses the question if EU regional policy interventions can at all be scientifically justified and legitimated on theoretical and empirical grounds from an economics point of view. The first two articles of the thesis (“The EU structural funds as a means to hamper migration” and “Internal migration and EU regional policy transfer payments: a panel data analysis for 28 EU member countries”) enter into one particular aspect of the debate regarding the justification and legitimisation of EU regional policy. They theoretically and empirically analyse as to whether regional policy or the market force of the free flow of labour (migration) in the internal European market is the better instrument to improve and harmonise the living and working conditions of EU citizens. Based on neoclassical market failure theory, the first paper argues that the structural funds of the EU are inhibiting internal migration, which is one of the key measures in achieving convergence among the nations in the single European market. It becomes clear that European regional policy aiming at economic growth and cohesion among the member states cannot be justified and legitimated if the structural funds hamper instead of promote migration. The second paper, however, shows that the empirical evidence on the migration and regional policy nexus is not unambiguous, i.e. different empirical investigations show that EU structural funds hamper and promote EU internal migration. Hence, the question of the scientific justification and legitimisation of EU regional policy cannot be readily and unambiguously answered on empirical grounds. This finding is unsatisfying but is in line with previous theoretical and empirical literature. That is why, I take a step back and reconsider the theoretical beginnings of the thesis, which took for granted neoclassical market failure theory as the starting point for the positive explanation as well as the normative justification and legitimisation of EU regional policy. The third article of the thesis (“EU regional policy: theoretical foundations and policy conclusions revisited”) deals with the theoretical explanation and legitimisation of EU regional policy as well as the policy recommendations given to EU regional policymakers deduced from neoclassical market failure theory. The article elucidates that neoclassical market failure is a normative concept, which justifies and legitimates EU regional policy based on a political and thus subjective goal or value-judgement. It can neither be used, therefore, to give a scientifically positive explanation of the structural funds nor to obtain objective and practically applicable policy instruments. Given this critique of neoclassical market failure theory, the third paper consequently calls into question the widely prevalent explanation and justification of EU regional policy given in static neoclassical equilibrium economics. It argues that an evolutionary non-equilibrium economics perspective on EU regional policy is much more appropriate to provide a realistic understanding of one of the largest policies conducted by the EU. However, this does neither mean that evolutionary economic theory can be unreservedly seen as the panacea to positively explain EU regional policy nor to derive objective policy instruments for EU regional policymakers. This issue is discussed in the fourth article of the thesis (“Market failure vs. system failure as a rationale for economic policy? A critique from an evolutionary perspective”). This article reconsiders the explanation of economic policy from an evolutionary economics perspective. It contrasts the neoclassical equilibrium notions of market and government failure with the dominant evolutionary neo-Schumpeterian and Austrian-Hayekian perceptions. Based on this comparison, the paper criticises the fact that neoclassical failure reasoning still prevails in non-equilibrium evolutionary economics when economic policy issues are examined. This is surprising, since proponents of evolutionary economics usually view their approach as incompatible with its neoclassical counterpart. The paper therefore argues that in order to prevent the otherwise fruitful and more realistic evolutionary approach from undermining its own criticism of neoclassical economics and to create a consistent as well as objective evolutionary policy framework, it is necessary to eliminate the equilibrium spirit. Taken together, the main finding of this thesis is that European regional policy and its structural funds can neither theoretically nor empirically be justified and legitimated from an economics point of view. Moreover, the thesis finds that the prevalent positive and instrumental explanation of EU regional policy given in the literature needs to be reconsidered, because these theories can neither scientifically explain the emergence and development of this policy nor are they appropriate to derive objective and scientific policy instruments for EU regional policymakers.