COHESION POLICY INSTRUMENTS AND ECONOMIC GROWTH: DO INSTITUTIONS MATTER?

Alen Host (), Vinko Zaninović and Kresimir Parat ()
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Alen Host: Faculty of Economics Rijeka
Kresimir Parat: Primorje - Gorski Kotar County

Economic Thought and Practice, 2017, vol. 26, issue 2, 541-559

Abstract: The EU Cohesion policy is based on a complex system of fiscal transfers, their main goal being to accelerate economic and social cohesion. In this paper, the contributions of the Structural funds and Cohesion fund (SFCF) to economic growth on national level while controlling for the institutional quality are tested. Aim of the paper is show whether institutional quality is a bottleneck for effective usage of SFCF. The analysis is based on the country-level data during 2000-2013 period. In the presented econometric models, we emphasize the importance of the institutional quality on the economic growth. The results show that when Institutional Quality Indicator as a regressor is included together with the size of inflows from SFCF, SFCF inflows have no influence on economic growth. Moreover, we found that neither the institutional quality separately or in interaction with SFCF inflows, is a statistically significant factor for economic growth in the EU-27. The results are signifincantly different when we apply the same methodology on two subsamples, where we distinguish between countries with high and low level of institutional quality index.

Keywords: SFCF; institutional quality; economic growth; convergence (search for similar items in EconPapers)
JEL-codes: E02 O43 (search for similar items in EconPapers)
Date: 2017
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