Gaining and Losing EU Objective 1 Funds: Regional Development in Britain and the Prospect of Brexit

56 Pages Posted: 23 Nov 2016

See all articles by Marco Di Cataldo

Marco Di Cataldo

London School of Economics & Political Science (LSE) - Department of Geography and Environment; Ca' Foscari University of Venice, Department of Economics

Date Written: November 22, 2016

Abstract

Leaving the European Union will entail for UK regions losing access to the EU Cohesion Policy. Have EU funds been effective in the country, and what may be the consequences of an interruption of EU financial support to the UK’s poorer regions? This paper studies the impact of ‘Objective 1’ funding – the highest form of EU aid – in Cornwall and South Yorkshire, two of the UK’s most subsidised regions. We employ synthetic control, matching and difference-in-differences methodologies in order to assess the labour market and economic performance of the two regions. The results indicate that Cornwall and South Yorkshire performed better than counterfactual comparisons throughout the period in which they were classified as Objective 1. Unlike Cornwall, South Yorkshire lost Objective 1 eligibility in 2006 and this massively reduced its share of EU funds. Our findings indicate that, after 2006, South Yorkshire was unable to sustain the gains obtained in previous years. This suggests that while Structural Funds may be effectively improving socio-economic conditions of poorer regions, the performance of subsidised areas could be deeply affected by a reduction (or worse, an interruption) of EU aid.

Keywords: EU Cohesion Policy, Objective 1, Brexit, synthetic control method, UK

JEL Classification: R11, O18, J60

Suggested Citation

Di Cataldo, Marco, Gaining and Losing EU Objective 1 Funds: Regional Development in Britain and the Prospect of Brexit (November 22, 2016). LEQS Paper No. 120, Available at SSRN: https://ssrn.com/abstract=2874162 or http://dx.doi.org/10.2139/ssrn.2874162

Marco Di Cataldo (Contact Author)

London School of Economics & Political Science (LSE) - Department of Geography and Environment ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Ca' Foscari University of Venice, Department of Economics ( email )

Cannaregio 873
Venice, Veneto 30121
Italy

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