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

Author Info

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

Abstract

Transfers to individuals, firms, and regions are often regulated by threshold rules, giving rise to a regression discontinuity design. An example are transfers provided by the European Commission to regions of EU member states below a certain income level. Researchers have focused on estimation of the average treatment effect of this program, assuming that it does not vary in a systematic way across units. We suggest a regression discontinuity design which allows for parametric or nonparametric identification of heterogeneous average treatment effects that systematically vary with observable characteristics in order to shed light on the role of absorptive capacity in determining the impact of regional transfers on economic growth across regions in the European Union. The results suggest that only about 47% of the regions, namely those with a sufficiently high endowment with human capital and a high quality of government, are able to turn transfers under the Union's Objective 1 Structural Funds programme into faster growth. Those regions are the ones which are responsible for a positive average effect of the programme.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8474.

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Date of creation: Jul 2011
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Handle: RePEc:cpr:ceprdp:8474
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Keywords: Absorptive capacity; Heterogeneous local average treatment effects; Regional transfers; Regression discontinuity design;

Find related papers by JEL classification:

  • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
  • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
  • 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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  10. Sascha O. Becker & Erik Hornung & Ludger Woessmann, 2011. "Education and Catch-Up in the Industrial Revolution," American Economic Journal: Macroeconomics, American Economic Association, vol. 3(3), pages 92-126, July.
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  14. Becker, Sascha & Egger, Peter H & Fenge, Robert & von, Ehrlich Maximilian, 2008. "Going NUTS: The Effect of EU Structural Funds on Regional Performance," Stirling Economics Discussion Papers 2008-27, University of Stirling, Division of Economics.
  15. Norman Gemmell & Richard Kneller & Ismael Sanz, 2011. "The Timing and Persistence of Fiscal Policy Impacts on Growth: Evidence from OECD Countries," Economic Journal, Royal Economic Society, vol. 121(550), pages F33-F58, February.
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Cited by:

  1. Antonio Accetturo & Guido de Blasio & Lorenzo Ricci, 2014. "A tale of an unwanted outcome: transfers and local endowments of trust and cooperation," Temi di discussione (Economic working papers) 959, Bank of Italy, Economic Research and International Relations Area.
  2. Vinko Mu?tra & Lena Male?eviæ Peroviæ & Silvia Golem, 2013. "Social attitudes and regional inequalities," ERSA conference papers ersa13p678, European Regional Science Association.
  3. Salima BOUAYAD AGHA & Nadine TURPIN & Lionel VEDRINE, 2013. "Au-Delà De La Moyenne : Les Effets Par Quantile De La Politique De Cohésion De L’Union Européenne," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 38, pages 27-48.

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