Too much of a good thing? On the growth effects of the EU's regional policy

Sascha Becker, Peter Egger and Maximilian von Ehrlich

European Economic Review, 2012, vol. 56, issue 4, 648-668

Abstract: The European Union (EU) provides grants to disadvantaged regions of member states from two pools, the Structural Funds and the Cohesion Fund. The main goal of the associated transfers is to facilitate convergence of poor regions (in terms of per-capita income) to the EU average. We use data at the NUTS3 level from the last two EU budgetary periods (1994–1999 and 2000–2006) and generalized propensity score estimation to analyze to which extent the goal of fostering growth in the target regions was achieved with the funds provided and whether or not more transfers generated stronger growth effects. We find that, overall, EU transfers enable faster growth in the recipient regions as intended, but we estimate that in 36% of the recipient regions the transfer intensity exceeds the aggregate efficiency maximizing level and in 18% of the regions a reduction of transfers would not even reduce their growth. We conclude that some reallocation of the funds across target regions would lead to higher aggregate growth in the EU and could generate even faster convergence than the current scheme does.

Keywords: EU regional policy; Regional growth; Generalized propensity score estimation; Quasi-randomized experiment (search for similar items in EconPapers)
JEL-codes: C21 H50 O40 R11 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (170)

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Working Paper: Too much of a good thing? On the growth effects of the EU's regional policy (2012)
Working Paper: Too much of a good thing? On the growth effects of the EU's regional policy (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:56:y:2012:i:4:p:648-668

DOI: 10.1016/j.euroecorev.2012.03.001

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