Absorptive Capacity and the Growth Effects of Regional Transfers: A Regression Discontinuity Design with Heterogeneous Treatmen

Sascha Becker, Peter Egger and Maximilian von Ehrlich

No 8474, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Transfers to individuals, firms, and regions are often regulated by threshold rules, giving rise to a regression discontinuity design. An example are transfers provided by the European Commission to regions of EU member states below a certain income level. Researchers have focused on estimation of the average treatment effect of this program, assuming that it does not vary in a systematic way across units. We suggest a regression discontinuity design which allows for parametric or nonparametric identification of heterogeneous average treatment effects that systematically vary with observable characteristics in order to shed light on the role of absorptive capacity in determining the impact of regional transfers on economic growth across regions in the European Union. The results suggest that only about 47% of the regions, namely those with a sufficiently high endowment with human capital and a high quality of government, are able to turn transfers under the Union's Objective 1 Structural Funds programme into faster growth. Those regions are the ones which are responsible for a positive average effect of the programme.

Keywords: Absorptive capacity; Heterogeneous local average treatment effects; Regional transfers; Regression discontinuity design (search for similar items in EconPapers)
JEL-codes: C21 H54 O40 R11 (search for similar items in EconPapers)
Date: 2011-07
New Economics Papers: this item is included in nep-eur, nep-geo and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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