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EU Structural Funds and Regional Income Convergence - A Sobering Experience

39 Pages Posted: 18 Apr 2016  

Philipp Breidenbach

Rhine-Westphalia Institute for Economic Research (RWI-Essen)

Timo Mitze

University of Southern Denmark

Christoph M. Schmidt

RWI - Leibniz-Insitut für Wirtschaftsforschung (RWI Essen); Ruhr-Universität Bochum (RUB); Institute for the Study of Labor (IZA); Centre for Economic Policy Research (CEPR)

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Date Written: April 2016

Abstract

The European Structural and Investment Funds (ESIF) are the prime instrument of EU regional policy. European policy makers place considerable hope into their growth stimulating funding measures to overcome current economic stagnation. Consequently, there is a strong need for credible evidence regarding the programs' effectiveness. Based on an empirical identification strategy linked to modern growth theory, we find that the disbursement of EU structural funds is negatively correlated with regional growth. Incorporating spatial dynamics and decomposing this correlation into a direct and a spatially-indirect component, it is particularly the latter which determines this "sobering" finding. Regarding the economics behind these results, the obtained negative spatial effect may reflect the role played by policy-induced spatial competition among neighboring regions. It could also highlight the backwardness in technological endowment and economic structures of highly funded regions. In any case, EU structural funding does not seem to contribute effectively to foster income convergence across regions.

Keywords: EU Regional Policy; Spatial Spillovers; Panel Data

JEL Classification: C21, R12, R58

Suggested Citation

Breidenbach, Philipp and Mitze, Timo and Schmidt, Christoph M., EU Structural Funds and Regional Income Convergence - A Sobering Experience (April 2016). CEPR Discussion Paper No. DP11210. Available at SSRN: https://ssrn.com/abstract=2766538

Philipp Breidenbach (Contact Author)

Rhine-Westphalia Institute for Economic Research (RWI-Essen) ( email )

Hohenzollernstr. 1-3
Essen, 45128
Germany

Timo Mitze

University of Southern Denmark ( email )

Campusvej 55
DK-5230 Odense, 5000
Denmark

Christoph M. Schmidt

RWI - Leibniz-Insitut für Wirtschaftsforschung (RWI Essen) ( email )

Hohenzollernstraße 1-3
Essen, 45128
Germany
++49 201 8149-227 (Phone)
++49 201 8149-236 (Fax)

Ruhr-Universität Bochum (RUB)

GC 2/150
Universitätsstr. 150
D-44780 Bochum
Germany

Institute for the Study of Labor (IZA)

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

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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