Going NUTS: The Effect of EU Structural Funds on Regional Performance

43 Pages Posted: 7 Jan 2009

See all articles by Sascha O. Becker

Sascha O. Becker

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

Peter H. 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 Maximilian University of Munich - Center for Economic Studies (CES)

Robert Fenge

CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Ifo Institute for Economic Research at the University of Munich

Date Written: December 2008

Abstract

The European Union (EU) provides grants to disadvantaged regions of member states to allow them to catch up with the EU average. Under the Objective 1 scheme, NUTS2 regions with a GDP per capita level below 75% of the EU average qualify for structural funds transfers from the central EU budget. This rule gives rise to a regression-discontinuity design that exploits the discrete jump in the probability of EU transfer receipt at the 75% threshold. Additional variability arises for smaller regional aggregates - so-called NUTS3 regions - which are nested in a NUTS2 mother region. Whereas some relatively rich NUTS3 regions may receive EU funds because their NUTS2 mother region qualifies, other relatively poor NUTS3 regions may not receive EU funds because their NUTS2 mother region does not qualify. We find positive growth effects of Objective 1 funds, but no employment effects. A simple cost-benefit calculation suggests that Objective 1 transfers are not only effective, but also cost-efficient.

Keywords: structural funds, regional growth, regression discontinuity design, quasi-randomized experiment

JEL Classification: C21, O40, H54, R11

Suggested Citation

Becker, Sascha O. and Egger, Peter H. and von Ehrlich, Maximilian and Fenge, Robert, Going NUTS: The Effect of EU Structural Funds on Regional Performance (December 2008). CESifo Working Paper Series No. 2495. Available at SSRN: https://ssrn.com/abstract=1314690

Sascha O. Becker

University of Warwick ( email )

Gibbet Hill Rd.
Coventry, West Midlands CV4 8UW
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://sobecker.de

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Ifo Institute for Economic Research

Munich
Germany

Peter H. 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 (Contact Author)

Ludwig Maximilian University of Munich - Center for Economic Studies (CES) ( email )

Schackstr. 4
Munich, 80539
Germany

Robert Fenge

CESifo (Center for Economic Studies and Ifo Institute for Economic Research) ( email )

Poschingerstr. 5
81679 Munich
Germany

Ifo Institute for Economic Research at the University of Munich ( email )

Poschingerstr. 5
Munich
Germany

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