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The role of fiscal transfers for regional economic convergence in Europe

Author

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  • Nickel, Christiane
  • Checherita-Westphal, Cristina
  • Rother, Philipp

Abstract

This paper provides evidence on the role of net fiscal transfers to households and EU structural funds for per-capita output convergence across a large sample of European regions during the period 1995-2005. We find that net fiscal transfers, while achieving regional redistribution, seem to impede output growth and promote an "immiserising convergence": output growth rates in poor receiving regions decline by less than in rich paying regions. EU structural and cohesion funds spent during 1994-1999 had a positive, but slight, impact on future economic growth, mainly through the human development component. JEL Classification: E62, R11, R23

Suggested Citation

  • Nickel, Christiane & Checherita-Westphal, Cristina & Rother, Philipp, 2009. "The role of fiscal transfers for regional economic convergence in Europe," Working Paper Series 1029, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20091029
    Note: 166869
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    Cited by:

    1. Meral KAGITCI & meral_ibraim@yahoo.com & Ecaterina Mariana SUCIU & ecaterinasuciu09@yahoo.com, 2011. "Cost-Benefit Analysis – A Helpful Instrument For The Absorption Valuation Of Structural And Cohesion Funds In Romania," Proceedings of the International Conference Investments and Economic Recovery, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 10(1), pages 311-322, December.
    2. Andrés Rodríguez-Pose & Yannis Psycharis & Vassilis Tselios, 2012. "Public investment and regional growth and convergence: Evidence from Greece," Papers in Regional Science, Wiley Blackwell, vol. 91(3), pages 543-568, August.
    3. Philippe Cyrenne & Manish Pandey, 2015. "Fiscal equalization, government expenditures and endogenous growth," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 22(2), pages 311-329, April.
    4. Consolo, Agostino & Koester, Gerrit & Nickel, Christiane & Porqueddu, Mario & Smets, Frank, 2021. "The need for an inflation buffer in the ECB’s price stability objective – the role of nominal rigidities and inflation differentials," Occasional Paper Series 279, European Central Bank.
    5. Carine Bouthevillain & John Caruana & Cristina Checherita & Jorge Cunha & Esther Gordo & Stephan Haroutunian & Geert Langenus & Amela Hubic & Bernhard Manzke & Javier J. Pérez & Pietro Tommasino, 2009. "Pros and cons of various fiscal measures to stimulate the economy," Economic Bulletin, Banco de España, issue JUL, pages 123-144, July.
    6. Nuno Baetas da Silva & João Sousa Andrade & António Portugal Duarte, 2016. "Alternative Sources of Dutch Disease: A Survey of the Literature," GEMF Working Papers 2016-10, GEMF, Faculty of Economics, University of Coimbra.
    7. Capella-Ramos, João & Checherita-Westphal, Cristina & Leiner-Killinger, Nadine, 2020. "Fiscal transfers and economic convergence," Occasional Paper Series 252, European Central Bank.
    8. Qiantao A. Zhang & Brian M. Lucey, 2019. "Globalisation, the Mobility of Skilled Workers, and Economic Growth: Constructing a Novel Brain Drain/Gain Index for European Countries," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 10(4), pages 1620-1642, December.
    9. Burret, Heiko T. & Feld, Lars P. & Schaltegger, Christoph A., 2022. "Fiscal federalism and economic performance new evidence from Switzerland," European Journal of Political Economy, Elsevier, vol. 74(C).
    10. POP Andrada, 2020. "Eu Funding €“ A Positive Impact On Gdp?," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 89-98, July.
    11. Claudia M. Buch, 2013. "From the Stability Pact to ESM - What Next?," Chapters, in: Andreas Dombret & Otto Lucius (ed.), Stability of the Financial System, chapter 5, Edward Elgar Publishing.
    12. LSE Enterprise,, 2011. "Study on the impact of the single market on cohesion: implications for cohesion policy, growth and competitiveness," LSE Research Online Documents on Economics 42840, London School of Economics and Political Science, LSE Library.
    13. Varga, Janos & in 't Veld, Jan, 2011. "A model-based analysis of the impact of Cohesion Policy expenditure 2000–06: Simulations with the QUEST III endogenous R&D model," Economic Modelling, Elsevier, vol. 28(1), pages 647-663.
    14. van Riet, Ad, 2010. "Euro area fiscal policies and the crisis," Occasional Paper Series 109, European Central Bank.
    15. Jinill Kim & Sunghyun Kim, 2017. "How much to share: Welfare effects of fiscal transfers," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 50(3), pages 636-659, August.
    16. João Sousa Andrade & António Portugal Duarte, 2013. "The Dutch Disease in the Portuguese Economy," GEMF Working Papers 2013-05, GEMF, Faculty of Economics, University of Coimbra.
    17. Claudiu-Tiberiu ALBULESCU & Daniel GOYEAU, 2013. "EU Funds Absorption Rate and the Economic Growth," Timisoara Journal of Economics and Business, West University of Timisoara, Romania, Faculty of Economics and Business Administration, vol. 6(20), pages 153-170.
    18. EFI - Commission of Experts for Research and Innovation (ed.), 2012. "Research, innovation and technological performance in Germany - EFI Report 2012," Reports on Research, Innovation and Technological Performance in Germany, Expertenkommission Forschung und Innovation (EFI) - Commission of Experts for Research and Innovation, Berlin, volume 127, number 2012e, March.
    19. Daniele VITTORIO, 2009. "Public Spending And Regional Convergence In Italy," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 4(2(8)_Summ).
    20. Marcelo Bianconi, 2011. "Transfer programs under alternative insurance schemes and liquidity constraints," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 20(2), pages 175-197.
    21. Marie-Eve Mulquin & Katja Senger, 2011. "Interregional transfers and economic convergence of regions," Serie Politique Economique 58, Université de Namur, Centre de Recherches en Economie Regionale et Politique Economique.
    22. DANIELE, Vittorio, 2009. "Development Policy, Public Spending and Regional Convergence in Italy (1996-2007)," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 9(2).

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    More about this item

    Keywords

    convergence; fiscal policy; regional economic growth; regional migration;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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