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The elusive quest for the holy grail of an impact of EU funds on regional growth

Author

Listed:
  • Jan Fidrmuc

    (Brunel University)

  • Martin Hulényi

    (Institute for Strategy and Analysis (ISA))

  • Olga Zajkowska

    (Narodowy Bank Polski)

Abstract

We analyse the impact of EU structural and cohesion funds on economic growth of European regions using 2SLS to tackle their potential endogeneity and estimating a spatial model to account for inter-regional spillovers. We use the presence of environmentally protected areas as instruments for Cohesion Policy funds. We find that the European funds have a significant and positive effect on regional economic growth in the EU. However, there is considerable heterogeneity in the effect of Cohesion Policy across individual EU member states: the effect is stronger in the new member states, and weak or negative in the countries hit by the recent austerity measures. The inter-regional spillovers in the effect of Cohesion Policy on regional growth are found to be important: most of the effect takes place outside the recipient region rather than inside. Finally, our results also confirm the positive impact of institutional quality.

Suggested Citation

  • Jan Fidrmuc & Martin Hulényi & Olga Zajkowska, 2020. "The elusive quest for the holy grail of an impact of EU funds on regional growth," NBP Working Papers 332, Narodowy Bank Polski, Economic Research Department.
  • Handle: RePEc:nbp:nbpmis:332
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    Cited by:

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    More about this item

    Keywords

    Regional aid; growth; environmental conservation; 2SLS; spatial.;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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