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Too much of a good thing? On the growth effects of the EU's regional policy

Author

Listed:
  • Becker, Sascha O.

    (University of Warwick)

  • Egger, Peter H.

    (ETH Zurich)

  • Von Ehrlich, Maximilian

    (ETH Zurich)

Abstract

The European Union (EU) provides grants to disadvantaged regions of member states from two pools, the Structural Funds and the Cohesion Fund. The main goal of the associated transfers is to facilitate convergence of poor regions (in terms of per-capita income) to the EU average. We use data at the NUTS3 level from the last two EU budgetary periods (1994-99 and 2000-06) and generalized propensity score estimation to analyze to which extent the goal of fostering growth in the target regions was achieved with the funds provided and whether or not more transfers generated stronger growth effects. We find that, overall, EU transfers enable faster growth in the recipient regions as intended, but we estimate that in 36% of the recipient regions the transfer intensity exceeds the aggregate effciency maximizing level and in 18% of the regions a reduction of transfers would not even reduce their growth. We conclude that some reallocation of the funds across target regions would lead to higher aggregate growth in the EU and could generate even faster convergence than the current scheme does.

Suggested Citation

  • Becker, Sascha O. & Egger, Peter H. & Von Ehrlich, Maximilian, 2012. "Too much of a good thing? On the growth effects of the EU's regional policy," CAGE Online Working Paper Series 70, Competitive Advantage in the Global Economy (CAGE).
    • Handle: RePEc:cge:wacage:70
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    EU regional policy; Regional growth; Generalized; propensity score estimation; Quasi-randomized experiment;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • 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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