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EU Structural Funds and Regional Income Convergence – A Sobering Experience

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  • Schmidt, Christoph
  • Mitze, Timo
  • Breidenbach, Philipp

Abstract

The European Structural and Investment Funds (ESIF) are the prime instrument of EU regional policy. European policy makers place considerable hope into their growth stimulating funding measures to overcome current economic stagnation. Consequently, there is a strong need for credible evidence regarding the programs’ effectiveness. Based on an empirical identification strategy linked to modern growth theory, we find that the disbursement of EU structural funds is negatively correlated with regional growth. Incorporating spatial dynamics and decomposing this correlation into a direct and a spatially-indirect component, it is particularly the latter which determines this “sobering†finding. Regarding the economics behind these results, the obtained negative spatial effect may reflect the role played by policy-induced spatial competition among neighboring regions. It could also highlight the backwardness in technological endowment and economic structures of highly funded regions. In any case, EU structural funding does not seem to contribute effectively to foster income convergence across regions.

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  • Schmidt, Christoph & Mitze, Timo & Breidenbach, Philipp, 2016. "EU Structural Funds and Regional Income Convergence – A Sobering Experience," CEPR Discussion Papers 11210, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:11210
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    9. Ville Vehkasalo, 2018. "Effectiveness of EU Regional Policy: Evidence from a Natural Experiment in Finland," REGION, European Regional Science Association, vol. 5, pages 1-19.
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    11. Krieger-Boden, Christiane, 2016. "EU cohesion policy, past and present: Sustaining a prospering and fair European Union?," Kiel Working Papers 2037, Kiel Institute for the World Economy (IfW Kiel).
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    16. Sabine D'Costa & Enrique Garcilazo & Joaquim Oliveira Martins, 2016. "Impact of Structural Reforms on Regional Growth: Distance to the Frontier Matters," SERC Discussion Papers 0203, Centre for Economic Performance, LSE.
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    More about this item

    Keywords

    Eu regional policy; Spatial spillovers; Panel data;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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