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Cohesion Policy Meets Heterogeneous Firms

Loredana Fattorini (), Mohammad Mahdi Ghodsi () and Armando Rungi ()
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Loredana Fattorini: IMT School for advanced studies

No 02/2018, Working Papers from IMT Institute for Advanced Studies Lucca

Abstract: In this paper, we empirically test the effects of the EU ‘cohesion policy’ on the performance of about 500,000 European manufacturing firms after combining regional policy data at NUTS- 2 level with firm-level data. In a framework of heterogeneous firms and different absorptive capacity of regions, we show that financing of ‘cohesion policy’ by European Regional Development Fund (ERDF) aimed at direct investments in R&D correlates with improvement of firms’ productivity in a region. Conversely, funding designed at overall Business Support correlates with negative productivity growth rates. In both cases, we registered an asymmetric impact along the firms’ productivity distribution, where a stronger impact can be detected in the first quartile, i.e. less efficient firms in a region. We finally argue that considering the heterogeneity of firms allows a better assessment of the impact of ‘cohesion policy’ measures.

Keywords: firm performance; total factor productivity; cross-country analysis; convergence; regional policy (search for similar items in EconPapers)
JEL-codes: D22 D24 E23 F15 L25 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-eff, nep-eur, nep-mac and nep-sbm
Date: 2018-02, Revised 2018-02
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Published in EIC working paper series

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http://eprints.imtlucca.it/3893/1/EIC_WP_2_2018.pdf First version, 2018

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