Abstract

http://ssrn.com/abstract=1711056
 
 

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Too Much of a Good Thing? On the Growth Effects of the EU's Regional Policy


Sascha O. Becker


University of Warwick; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); Institute for the Study of Labor (IZA); Ifo Institute for Economic Research

Peter Egger


Ifo Institute for Economic Research - International Trade and Foreign Direct Investment; Ludwig-Maximilians University of Munich; CESifo (Center for Economic Studies and Ifo Institute for Economic Research

Maximilian Von Ehrlich


Ludwig-Maximilians-Universität München - Center for Economic Studies (CES)

October 2010

CEPR Discussion Paper No. DP8043

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). Using generalized propensity score estimation, we analyze to which extent the goal of fostering growth in the target regions was achieved with the funds provided and whether more transfers generated stronger growth effects or not. 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 efficiency maximizing level and in 18% percent 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.

Number of Pages in PDF File: 33

Keywords: EU regional policy, Generalized propensity score estimation, Quasi-randomized experiment, Regional growth

JEL Classification: C21, H50, O40, R11

working papers series





Date posted: November 22, 2010  

Suggested Citation

Becker, Sascha O. and Egger, Peter and von Ehrlich, Maximilian, Too Much of a Good Thing? On the Growth Effects of the EU's Regional Policy (October 2010). CEPR Discussion Paper No. DP8043. Available at SSRN: http://ssrn.com/abstract=1711056

Contact Information

Sascha O. Becker (Contact Author)
University of Warwick ( email )
Gibbet Hill Rd.
Coventry, West Midlands CV4 8UW
United Kingdom
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany
HOME PAGE: http://sobecker.de
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
Ifo Institute for Economic Research
Munich
Germany
Peter Egger
Ifo Institute for Economic Research - International Trade and Foreign Direct Investment ( email )
Poschingerstr. 5
Munich, DE-81679
Germany
+49 0 89 9224 1238 (Phone)
+49 0 89 985369 (Fax)
HOME PAGE: http://www.cesifo-group.de/portal/page?_pageid=36,425628&_dad=portal&_schema=PORTAL
Ludwig-Maximilians University of Munich
Schackstr. 4
Munich, 80539
Germany
CESifo (Center for Economic Studies and Ifo Institute for Economic Research
Poschinger Str. 5
Munich, DE-81679
Germany
Maximilian Von Ehrlich
Ludwig-Maximilians-Universität München - Center for Economic Studies (CES) ( email )
Schackstr. 4
Munich, 80539
Germany
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